Taiwan Makers Break Into High-End Niche Markets

Riding the crest of Taiwan's high-flying electronics industry, local switch makers have enjoyed banner sales in recent years as they hone their technical edge and expand into high-margin niche markets.

Many of these gains have come through specialization and close cooperation within the local switch-making sector, which has enabled firms to focus on their core competencies while minimizing direct competition. The result has been the creation of a reliable supply network of high-quality and competitively priced parts and components that has opened doors to lucrative high-end markets.



Efforts by local producers to upgrade come at a time when they are facing increasingly fierce competition from big rivals in mainland China. In order to outflank the new rivals, switch makers in Taiwan are undertaking a number of innovations, including the development and refinement of products that are smaller, lighter and more functional. Most local switch makers have also started to leverage their vast experience and know-how in circuitry and signals to diversify into new markets.

Like most other industries in Taiwan, local switch makers generally rely on original equipment/design manufacturing (OEM/ODM) orders from foreign customers, especially from those in the U.S. and Europe. This situation does not seem likely to change in the short term since much of the local industry is composed of small and medium enterprises that generally lack the resources to develop and market branded products.

Switch makers have also followed other Taiwanese manufacturers in setting up production bases in mainland China to lower production costs and be close to Taiwanese electronics-product makers there. A few companies, however, remain rooted in Taiwan, opting to focus on higher-margin items rather than compete on price alone.

DIP Switches

One company that exemplifies the trend to higher-end products is Excel Cell Electronic Co., Ltd. (ECE), which claims to be the No. 1 manufacturer of dual inline package (DIP) switches in Taiwan.

In addition to its core line of DIP switches, ECE produces terminal blocks and relays; slide, push and micro switches; and universal serial bus (USB) and IEEE 1394 connectors.

Jimmy Huang, ECE's sales manager, says that his company exports its DIP switches to the world's top brands for industrial machinery, instruments, security systems and other products that require precision-control circuitry. ECE produces a complete range of DIP switch models, from one-pole (two leads) to 12-pole (which allows for 4,096 setting options), and available in both through-hole and surface-mount technology (SMT) types, to meet the various needs of manufacturers.

Huang says that his company has been developing smaller, lighter and more functional DIP switches. The company recently demonstrated new piano-type (edge-actuated) DIP switch models that are smaller, cost less to make, and are more functional than general DIP switches on the market.

Huang claims that ECE's strong global competitiveness lies in the company's ability to design and produce most of the special production and testing equipment it needs, thereby improving production efficiency and quality. The company further ensures top-quality results through its strict quality-control system.

Another competitive asset of the company is its ability to integrate all aspects of the production process, from product design to manufacturing. This has helped the company greatly cut costs and shorten delivery times. In addition, the company has been diversifying its product lines to provide the convenience of one-stop shopping to its global customers.

Established in 1981, ECE is an ISO9001- and ISO14001-certified company with two plants and a third facility scheduled to come on line soon. Its central Taiwan plant has 350 employees, including about 30 R&D specialists, and produces mainly high-end and high-margin new items. Its mainland Chinese plant, in Guangdong Province, employs about 200 people and mainly produces standard items in large-volume batches. A new plant in the mainland province of Jiangsu is scheduled to begin mass production later this year or early next year.

ECE can currently produce seven million to 10 million DIP switches monthly. About 60% of its output is exported to major markets, including Asia, Europe and the U.S.

ECE's DIP switch production now accounts for about 65% of the company's total revenue, terminal block and relay products for about 25%, and other products, such as sockets, universal serial bus (USB) and IEEE 1394 connectors, and modular plugs, for the remaining 10% or so.

Rocker Switches

Another leading switch maker in Taiwan is Joemex Electric Corp., which specializes in rocker AC-power switches, circuit breakers, and its newly developed 2-in-1 switch breakers. Since its establishment in 1984, the company has won 15 patents on its innovative products.

By integrating its expertise in bi-metal circuit breakers and abundant design and manufacturing experience with power switches, Joemex recently developed two internationally patented 2-in-1 switch-breaker models, making it one of the only two such manufacturers in the world.

Joemex sales manager Cliff Wang is optimistic that his company's new switch breakers will soon become market mainstays since they combine the functions of a switch and breaker into one cost-efficient unit. He claims that the 2-in-1 switches have already been warmly received by buyers around the world, especially among producers of extendable outlets, mini generators and uninterrupted power supplies. Joemex plans to introduce two new 2-in-1 switch models to expand sales in the segment.

Joemex is a specialist producer of bi-metal breakers. Such breakers have a hot-forged zinc and iron alloy thermostat plate that quickly responds to high temperatures and overloaded currents. The bi-metal breakers are nearly as efficient as home-use magnetic breakers, Wang says.

He goes on to say that Joemex's core competitiveness lies mainly in the company's high-quality but reasonably priced products. By using self-developed production and testing equipment, the company can keep its costs about 40% lower than most other suppliers.

Joemex's production lines and products are certified under several international safety standards, including UL, CSA and VDE, Wang says. They have also earned the approval of major Japanese companies, known for demanding the highest quality.

Wang attributes his company's high quality level to the use of advanced production equipment and heavy investment in developing top-precision manufacturing jigs and fixtures.

Joemex is currently a major supplier to many big American brands, including the Tyco Group. The company moved its production to a new plant in Guangdong Province, mainland China in 2001. The mainland plant now employs about 800 workers and has a monthly capacity of about 3.5 million circuit breakers and 2.5 million switches.

In addition to its core products, Joemex produces thermostat and motor-protector devices and is planning to tap the air-conditioner compressor-protector field.

Signal Controls

Established in 1975, Shanpu Co. Ltd. Is an experienced maker of signal push-button switches and has been pioneering the development of such items incorporating light-emitting diode (LED) lighting sources.

Thomas Liao, Shanpu's president, says that his company now offers five basic LED push-button switch series and about 10 traditional series, on the basis of which dozens of switch models can be developed to meet customers' various requirements. The company makes both through-hole and SMT switches.

Due to their high quality, Shanpu's switches are widely adopted by makers of communications equipment, stage consoles, cellphones and digital cameras, Liao says.

He states that his company only uses the highest-end materials in its products. The key metal parts used in Shanpu's products are made of high-purity copper or are coated with a thicker than normal electroplating layer to lower the contact resistance of the switches, thereby reducing interference. Shanpu also adopts high-quality domes imported from Japan in the inner mechanisms of the push-button switches, improving quality and durability. Each switch is fully tested at the company and rated to last for over 300,000 continuous operations.

Liao says that his company has an advantage in its fast development time--which he claims is 30% shorter than most competitors--and flexible product-development strategy, which are made possible because of in-house mold-development operations. Making molds in house, he says, has the added benefit of reducing production costs by 20% to 30%.

Shanpu also produces all the plastic parts and components used in its switches, further reducing costs while raising quality and shortening delivery times. These advantages have made Shanpu a major OEM supplier to such leading-edge American firms as E-Switch and CIT, Liao says.

Shanpu operates a plant in northern Taiwan's Taipei County. The highly automated facility has a highly skilled crew of 12 workers that turns out 500,000 push-button switches a month.