New THTMA Chairman Outlines Goals for Next Three Years

A top priority is to pry open wider door to the China market

With the Taiwan Hand Tool Manufacturers' Association (THTMA) having elected at its 12th general conference new chairman, supervisors and directors on September 9, 2010, CENS interviewed the Jack Lin, the newly elected chairman, to talk about his blueprint to drive the industry's sustainable development in the global market in the next three years.

Founded over 30 years ago, the THTMA has over 300 members as Taiwan's largest trade association for hand tool makers. The association offers much needed help to local hand tool manufacturers, who are mostly SMEs (small and medium-sized enterprises) that tend to lack financial resources and independent marketing savvy. After being battered by the global recession in 2009, the hand tool industry now has to take more concrete action to strengthen its recovery amid the global upturn in 2010.

Lin, also the president of Yih Cheng Factory Co., Ltd., now the largest Taiwanese maker of screwdrivers, said that the industry's rebound in 2010 has been mainly driven by the global economic recovery and customers' restocking, adding that “the industry's production value for 2010 is expected to hit NT$80 billion, for a 30% growth over that in 2009.” Aiming to maintain growth for the hand tool sector in Taiwan, Lin outlines several specific goals for his three-year tenure.

Targeting China Market
A priority amid Lin's objectives is to captain the THTMA to pry open the door wider for Taiwanese suppliers to the China market, which is growing rapidly, by enhancing cooperation between the trade association and its Chinese counterparts.

China is no longer an underdeveloped global market, whose demand for both low-end to upmarket hand tools has been rocketing in recent years, says Lin, citing auto repair tools as example, a segment that has been expanding alongside the car market in China, which has already exceeded the American counterpart in 2009 to become the world's biggest new car market, with about 15 million cars sold there throughout 2010.

“Taiwanese hand tool makers' opportunities of moving up to become OBM (original brand manufacturer) are there for the market conditions are very favorable,” says Lin. Taiwan-made tools have proven fascinating to Chinese consumers, due partly to reliable quality and competitive prices, and partly to shared ethnic and linguistic ties between Taiwan and China, not to mention the benefits of the cross-strait ECFA (Economic Cooperation Framework Agreement).

However, Lin says that China is a lucrative but comparatively complex market due to sheer size, which makes it risky and difficult for Taiwanese makers to explore independently. In many cases, they ultimately toil in vain and fail to succeed in branding due to unfamiliarity with the market and consumers, and lack of useful information and assistance from trustworthy local partners, despite sharing the same language with mainland Chinese.

Closer Cross-strait Cooperation
An urgent task for Lin is to boost cooperation with China's national distribution and trade associations. “The THTMA has started to work with the China National Hardware Association and All-China Federation of Industry & Commerce to get an insider's view for Taiwanese makers. Mutual information sharing and holding periodic meetings will help reduce risk to explore markets for Taiwanese makers. More importantly, Taiwanese makers can tap these associations' nationwide distribution channels to facilitate their entry into the market,” says Lin.

Lin's cross-strait cooperation enhancement plan seems realistic due mainly to the ECFA, which will call on China to eventually reduce tariffs on over 500 kinds of Taiwan-made goods and services, including hammers, wrenches and pliers, to zero by 2012. In essence, Taiwanese makers will be more price-competitive than foreign rivals in China. Meanwhile and with Taiwan not an ASEAN member, building reliable distributorships in China will make Taiwanese suppliers more competitive than ASEAN counterparts, who can do business there at favorable terms, says Lin.

Furthermore, relying on Chinese distributors to explore the local market is also likely to enhance Taiwanese makers' willingness to turn some of their made-to-order production to volume production on the island, says Lin, basing such view on the ECFA effect, rising costs and labor shortages in China's coastal provinces. “We hope Taiwanese makers will not only produce high-end tools, but also resume production of low-to-mid-segment tools by automating production in Taiwan in the future. Such move is expected to win back some foreign buyers' orders originally placed with Chinese manufacturers, and deliver more own-brand tools to China,” says Lin. Also the Taiwan hand tool industry's overall output value will significantly rise along with THTMA's focus on cooperation with Chinese partners.

Training and Education
To assist Taiwanese manufacturers to sharpen competitiveness, Lin also plans to create more training and educational opportunities. “Taiwanese makers, despite being well-known for commitment to innovation, quality and price, are nevertheless mostly SMEs who tend to lack up-to-date marketing capabilities and systematic enterprise management, which are hindrances when competing globally,” says Lin.

Another motivation behind Lin's plan to offer educational opportunities is labor shortage in Taiwan's hand tool industry. “Traditional manufacturing is generally unpalatable as career to people with college and grad school training, for they find hand tool manufacturing too tough,” says Lin. To offset the industry's inability to attract young blood, the THTMA is determined to help local companies provide on-the-job training to upgrade existing personnel.

Thus, the THTMA is working with Taiwan's Tunghai University to offer training and courses to members. “A couple of industry insiders well-known for achievements in product design, marketing and management have promised to give lectures. We hope every member can take part, gleaning from the instructors' experience, to upgrade their knowledge. The THTMA will also subsidize members as incentive,” says Lin.

Boost Global Presence
Another tried-and-true strategy to be continued by Lin is to organize members to participate in global trade fairs, a way to further build global presence for Taiwan's hand tool makers.

“We will target eight to ten major international trade shows every year, with top-caliber events as the International Hardware Show Cologne, Automechanika Frankfurt and China International Hardware Show in Shanghai being priorities, as platforms to build reputation and capabilities of Taiwan's hand tool industry,” Lin says.

Realizing the sometimes discouraging cost to attend trade shows, Lin notes that the THTMA will do its best to apply for governmental financial support. “We plan to apply for over NT$40 million from the government in the next three years to subsidize members' exhibition expenses, which will ease the burden on those interested to build global presence.”

Joint R&D With China Steel
The THTMA will focus more on starting joint R&D projects with China Steel, Taiwan's largest steelmaker, to develop new steels and special materials, and improve heat treatment and surface processing technologies, according to Lin.

“To enhance added-value of Taiwan-made hand tools, the industry will have to count on its only upstream supplier China Steel. Therefore, the THTMA hopes to tap the steelmaker's enormous R&D resources to upgrade technological prowess of the industry, with all the innovative materials and technologies developed to be provided exclusively to Taiwanese makers,” Lin concludes.

Unit: millions of US dollars

Import Value of Taiwan's Hand Tool Industry by Product Category
Year	Manual Hand Tools	Hydraulic Tools	Pneumatic Tools	Electric Tools	Total	Y-on-Y Growth Rate
2001	198.83	6.02	30.05	52.19	287.09	-25%
2002	195.57	2.07	30.77	53.17	284.58	-1%
2003	218.30	6.60	62.12	49.13	310.15	9%
2004	276.23	7.61	46.94	68.14	398.92	29%
2005	270.79	8.87	49.48	64.55	393.69	-1%
2006	272.45	9.68	45.85	72.98	400.96	2%
2007	280.31	11.58	47.05	80.29	419.23	5%
2008	268.51	10.67	48.12	83.15	410.45	-2%
2009	192.34	7.8	31.50	32.11	263.75	-36%
2010 (Jan. to May)	102.43	2.88	19.34	15.74	140.39	--

Source: THTMA

Unit: millions of US dollars

Export Value of Taiwan's Hand Tool Industry by Product Category
Year	Manual Hand Tools	Hydraulic Tools	Pneumatic Tools	Electric Tools	Total	Y-on-Y Growth Rate
2001	1403.99	26.09	277.47	219.73	1927.28	-5%
2002	1448.31	25.62	312.98	234.94	2021.85	5%
2003	1513.27	22.16	353.92	228.09	2117.44	5%
2004	1682.24	22.38	485.81	202.75	2393.18	13%
2005	1750.04	21.10	519.65	176.97	2467.76	3%
2006	1855.34	19.90	512.91	188.62	2576.78	4%
2007	1994.11	17.89	535.42	165.10	2712.52	5%
2008	2092.68	17.94	495.90	146.40	2752.92	1%
2009	1552.22	14.25	337.82	80.61	1984.90	-28%
2010 (Jan. to May)	802.20	7.47	189.85	42.36	1041.88	--

Source: THTMA