Taiwan's Machinery Industry Recovering Amid Global Uptrend in Q4, 2009
2010/05/07 | By Ben ShenAs most of the global economy and hence manufacturing industries recover in 2010 after weathering the global meltdown in the second half of 2008, Taiwan's machinery industry is seeing promising order visibility, asserts C.L. Chen, industry analyst at the official Industry & Technology Intelligence Services (ITIS).
Statistics compiled by the ITIS show the overall production value of Taiwan's machinery industry in the fourth quarter 2009 totaled a preliminary estimate of US$3.55 billion, down 17.2% year-on-year but a 5.5% growth from the preceding quarter. The quarter-on-quarter growth in the third and fourth quarters 2009 show the domestic machinery industry has begun a recovery; while the ITIS preliminarily estimated Taiwan's machinery industry's overall production value at US$12.73 billion in 2009, down 34.6% from a year earlier.
Largest Sector
Taiwan's machine tool sector is the largest among the machinery industry whose production value was estimated at US$621.4 million in the fourth quarter of last year, up 10.5% from the preceding quarter but down 35.9% year-on-year. The fourth quarter growth of the machine-tool sector was driven mainly by demand from China. 
The second-largest sector is electronics and semiconductor manufacturing equipment. And the clear recovery in Taiwan's electronic and IT sector has pushed up the production value of the sector, which was estimated at US$273.48 million in the fourth quarter of last year, by 31.3% from the preceding quarter, but still down 20.2% year-on-year. The overall production value for this sector is projected to reach US$86.9 million, down 47.1% from a year earlier.
Other smaller machinery sectors whose production values grew in the fourth quarter relative to those in the third last year included manufacturing equipment, conveyors, machine tools, and mechanical transmission equipment for textiles, garment and leather, electronics and semiconductors products.
Imports & Exports
ITIS statistics also show Taiwan imported US$2.5 billion of machinery in the fourth quarter of 2009, up 22.6% from the preceding quarter and down 31% year-on-year. In this period, the three largest import items, in descending order, were special-purpose machinery totaling US$445.68 million, up 52.6% year-on-year and up 57.9% from the preceding quarter; pumps, compressors and valves amounting to US$348.88 million, down 4% year-on-year and up 20.6% from the preceding quarter; electronics and semiconductor manufacturing equipment totaling US$319.8 million, down 63.7% annually and down 26.2% from the preceding quarter.
Taiwan exported US$2.89 billion of machinery in the fourth quarter of last year, down 17.4% year-on-year but up 17.7% from the preceding quarter, with the overall export value estimated at US$10.07 billion in 2009, down 34% year-on-year.
The top-three export items in the fourth quarter of last year, in descending order, were machine tools whose export value totaled US$496.48 million, down 40.1% from a year earlier but up 24.9% from the preceding quarter; pumps, compressors and valves at US$335.46 million, down 16.9% year-on-year but up 3.9% from the preceding quarter; plastics and rubber processing machinery at US$219.48 million, down 10.4% year-on-year and up 9.2% from the preceding quarter.
Chen says the clearly rising export values in the fourth quarter of last year from the preceding quarter reflect recovery of the domestic machinery industry.
Notable Activities
Fair Friend Group Teams Up With China-based Kaijieli Group
Fair Friend Group, a major machine tool conglomerate in Taiwan, in early December last year signed a partnership with two Beijing-based machinery manufacturers-Kaijieli Group and Beijing No.1 Machine Tools Works-showing the machinery industries in Taiwan and China have turned from rivalry to collaboration.
Fair Friend, Kaijieli and Beijing No.1 Machine Tools together posted turnover totaling about US$1.11 billion in 2008. Fair Friend chairman Jimmy Chu says the joint venture will realize synergy by tapping individual strengths. Beijing No.1 Machine Tools has a solid foundation in fabricating large special-purpose machine tools, with Fair Friend being noted for strong international marketing.
Turning out an annual 5,800 metal-forming and metal-cutting machine tools in 2008, Fair Friend is the largest maker of full-function CNC (computerized numerically controlled) machine tools in China.
With annual sales amounting to 2.8 billion renminbi in 2008, Beijing No.1 Machine Tools specializes in developing and producing large double-column machine tools, machining centers, and milling machines. Based in Fujian Province, Kaijieli runs various businesses, including machinery, import and export, logistics and property development. With sales reaching two billion renminbi in 2008, the company led in sales of either medium and small electricity generators and variable-speed milling machines.
Teco Forms Joint Venture in China
Teco Group, one of Taiwan's leading manufacturers of heavy-duty electric machinery, has announced its partnership with a China-based wind turbine manufacturer, aiming to develop large wind turbines suitable for use in Taiwan and China.
Teco chairman C.K. Liu estimates the business opportunities generated in the coastal area of Fujian Province and western coast of Taiwan will reach US$76.67 billion based on the projection that some 8,000 wind turbines will be installed in such areas, with each costing US$9.58 million.
Hiwin Technologies Acquires Mega-F of Israel
With introductions by U.S.-based Applied Materials, in November last year Hiwin Technologies Corp., one of Taiwan's leading manufacturers of linear-motion devices and technologies, acquired Mega-F Motion Systems Ltd., an Israeli developer of motion control technology, via its affiliate Hiwin Mikrosystem Corp.
Hiwin Technologies concentrates on the development and production of ballscrew, linear guideway and single-axis robot, and Hiwin Mikrosystem specializes in the development of linear motor system, linear actuator and positioning measurement system, as well as being Taiwan's exclusive maker of linear motor systems and semiconductor and photovoltaic equipment.
Over the past several years, Hiwin Technologies had to rely on importing pricey precision drivers from the U.S., Japan and Israel, hence undermining its competitiveness globally, which has been offset by the acquisition of Mega-F.
Founded in early 2000 and tapping its rich knowledge and experience in motion control technology, Mega-F develops and markets software-intensive programmable DSP-based motion control products that help raise quality of automated systems. Motion controllers and modules are utilized in advanced industrial applications, such as semiconductor manufacturing equipment, electronic testing and inspection stations, imaging systems and high quality printing machinery. Leading makers of semiconductor-manufacturing equipment, including Applied Materials and KLA-TENCOR, are among Mega-F's major clients.
Eric Y.T. Chuo, chairman of Hiwin Technologies, says that acquiring Mega-F will help to raise corporate competitiveness in the industrial robotic sector, enabling it to become a leading supplier of industrial robots with targeted output rising to 50,000 units by 2010 from the earlier projected 15,000 units.
Mega-F has been renamed Mega Fab after being taken over, and will focus on development and production of basic drivers for Hiwin Group's industrial robots and positioning measurement systems.
Outlook
The International Monetary Fund (IMF) says the global recession is subsiding, with the recovery being slow. The ITIS believes Asia, especially China and India, are driving the global economy out from its doldrums, mainly backed by their stimulus programs to fuel car and consumer electronics purchases, which also are attracting more investment capital than expected.
Another favorable factor for Taiwan's machinery industry is the foreseeable signing of the Economic Cooperation Framework Agreement (ECFA) between Taiwan and China. Once the pact is signed, the machinery sector in Taiwan will be on a more level playing field relative to other Asian rivals, especially ASEAN, mainly due to lowered duties that will allow Taiwan-made machinery to be exported to China at more competitive prices.
The global recession sapped the overall production value of Taiwan's machinery industry, which totaled US$12.73 billion in 2009, down 34.6% year-on-year; but the downtrend has reversed in the second half. The ITIS predicts the domestic machinery industry will see overall production value amount to US$3.96 billion in the first quarter of this year, up 11.7% from the preceding quarter; while the production value for the industry is expected to reach US$16.14 billion in 2010, for a 26.9% year-on-year growth.
| Annual Production Value of Taiwan's Machinery Industry Unit: NT$1 billion | ||||
| Sector | 2008 | 2009 (estimates) | 2010 (forecast) | Annual Growth 2010/2009 |
| Machine Tool | 144.577 | 66.855 | 84.03 | 25.7% |
| Agricultural Machinery | 3.468 | 3.637 | 3.805 | 4.6% |
| Mining, Construction Equipment | 1.03 | 0.452 | 0.587 | 29.7% |
| Food, Beverage, Tobacco-making Machinery | 6.355 | 4.912 | 5.633 | 14.7% |
| Textile, Garment, Leather-making Machinery | 22.439 | 18.116 | 20.278 | 11.9% |
| Woodworking Machinery | 12.425 | 7.6 | 10.012 | 31.7% |
| Chemical Machinery | 20.644 | 15.766 | 18.205 | 15.5% |
| Plastics & Rubber Processing Machinery | 34.786 | 25.704 | 30.245 | 17.7% |
| Electronics & Semiconductor Manufacturing Equipment | 51.56 | 27.269 | 39.414 | 44.5% |
| Special-purpose Machinery | 42.567 | 28.513 | 35.54 | 24.6% |
| Pumps, Compressors, Valves | 42.077 | 30.11 | 36.094 | 19.9% |
| Mechanical Transmission Equipment | 13.281 | 9.027 | 11.154 | 23.6% |
| Conveyors | 35.532 | 23.059 | 29.295 | 27% |
| Office Automation Machinery | 7.54 | 5.531 | 6.535 | 18.2% |
| Pollution Abatement Equipment | 3.096 | 1.722 | 2.409 | 39.9% |
| Powerful Hand Tools | 12.406 | 7.834 | 10.12 | 29.2% |
| Other General-purpose Equipment | 187.058 | 137.206 | 162.132 | 18.2% |
| Total | 608.859 | 398.484 | 505.489 | 26.9% |
| Source: Industry & Technology Intelligence Services under the Industrial Economics & Knowledge Center, Industrial Technology Research Institute | ||||