Taiwan's Metalworking Companies Add Value to Overcome Growing Competition

Efforts focused on R&D, marketing strategies and integrated operations

Facing increasing global rivalry from underselling competitors, Taiwanese metalworking and metal product manufacturers are upgrading their technology and improving their operations to boost added value.

“Added value” refers to output value minus the cost of intermediate inputs, and in the case of Taiwan is closely related to fluctuations in the prices of materials.

According to the Metal Industries Research & Development Centre (MIRDC), a government-funded research institute, the industry's added-value ratio declined to 25.5% in 2007 and 2008, largely because of skyrocketing steel prices. The ratio climbed to 29% in 2009 as steel prices dropped, before falling back to 26.7% a year later as materials prices rose.

To counter this declining trend, major metalworking and metal product companies are actively moving upmarket. The MIRDC suggests that smaller-sized manufacturers do the same by placing greater emphasis R&D, marketing strategies, and integrated operations in order to generate higher added value.

Among Taiwanese metalworking and metal product makers, Auroral Sinter Metals Co., Ltd. and Yuang Hsian Metal Industrial Corp. are using different competitive advantages to pursue enhanced added value.

Auroral
Established in 1996 in the central Taiwan county of Miaoli, Auroral has been engaged in powder metallurgy for over 17 years and has built up a solid reputation among buyers throughout the world, particularly from Japan, Germany, and other Asian nations, for its integrated manufacturing capability and consummate skills as well as value-added services.

Sales representative Joe Liao said that Auroral can handle almost the entire cycle of powder metallurgy processing, from raw materials mixing, compaction, sintering, sizing through secondary sintering, machining, steam treatment, oil impregnation, and vibration tumbling to pre-delivery inspection and packaging, in house. In this way the company turns out a variety of metal parts and components for different applications, such as oil pump rotors, rotors, sprocket gears, and timing pulleys for automobiles; helical gears, stepping motor gears, and hardware parts for machinery and transmission systems; warm compacting parts, bevel gears, and related parts for hand tools; and bushing and filter parts. All of the products beat out the competition in terms of high quality, consistent quality, and efficiency, Liao claimed.

The company's well-integrated production capability is achieved not just by a comprehensive, in-depth knowledge of powder metallurgy and the prosperities of different metals such as like iron and steel, stainless steel, and copper, but also by a complete array of production and quality inspection equipment at its factory.

To build up its competitiveness, Liao stressed, his company has spent a considerable amount on installing state-of-the-art equipment, including 30 compacting machines from Japan, six sintering furnaces from Germany, and 17 sizing machines and two automatic ultrasonic washers, together with microcomputer universal testing machines, profile projectors, Vickers hardness testers, CNC gear measuring machines, 3D measure gauges, metallography pre-treatment equipment, and rotatory glass plate optical sorting machines.

With TS16949 certification and D&B D-U-N-S system registration, Auroral has tapped into the OEM (original equipment manufacturing) chains of large carmakers from China, Japan, and Germany either directly or indirectly, according to Liao. To stay competitive, he went on, the company insists on importing high-quality materials from globally known suppliers, such as iron and alloys from Japan's Kobe Seiko and Sweden's Hoganas, copper from OMG of the U.S., and stainless steel from AMTEK.

Value-added Services
To secure sustainable growth with better customer satisfaction, Auroral provides value-added services that make it a solution provider as well as manufacturer.

Liao indicated that in addition to powder metallurgy services, the core of its business, the company is also able to provide forging, blank stamping, lost wax (investment) casting, metal injection molding, plastic injection, precision machining, and gauge and jig services as well. The company uses its extensive experience to help foreign buyers outsource to Taiwan and take advantage of the island's quality control and technical support, along with its manufacturing capabilities. All these services, Liao said, are aimed at providing one-stop shopping that greatly cuts the time and cost of procurement.

Liao reported that his company's annual turnover has steadily grown, from US$7.4 million in 2006 to US$14.5 million in 2012, and is forecast to hit US$18.2 million in 2013, despite Europe's economic sluggishness, thanks mostly to the value-added services that generate benefits for both itself and its customers.

To maintain growth momentum and develop sustainably in the global competition, Liao said, the company will spend US$20 million in the next few years to build a new factory and purchase new equipment to further upgrade its production capability.

Yuang Hsian
Yuang Hsian was founded in 1979 in Taiwan's central county of Changhua to produce copper alloy wire. After decades of strenuous efforts to upgrade its manufacturing capability, today the company is an industry-leading supplier of wrought and cast copper and copper alloy products.

The firm supplies a comprehensive line of products with a full range of specifications and sizes, including free cutting brass rods and wires, copper alloy wires, EDM (electrical discharge machining) wires, copper anode materials, and soudronic can welding wires. The products are shipped to global markets including Japan, the U.S., Australia, South America, China, Southeast Asia, and South Africa, where they are widely used in industrial production, especially of electrical components and fasteners.

Yuang Hsian was qualified by the United Kingdom Accreditation Service as a BSI-ISO20000-certificated company in 2006, after obtaining ISO 9001 and ISO 9002 certification in 2003 and 1998, respectively. In 2008, the world-class manufacturer further boosted its profile by obtaining RoHS (Restriction of Hazardous Substances) approval.

The company is now able to turn out up to 1,200 tons of copper and copper alloy wires and 2,000 tons of brass rods a month, as well as 2,000 tons of RoHS-compliant cadmium-free and cadmium-less wires and rods a year. This makes it the largest supplier of its type in Taiwan.

Technological Competitiveness
In the face of the skyrocketing international price of copper, which has been hovering around the level of US$7,000 per ton, along with growing rivalry from competitors in emerging countries, Yuang Hsian has managed to stay in good shape grow steadily, thanks largely to its dedication to technological upgrading.

The company is noted for being the first in Taiwan to introduce Upward Continuous Casting (Upcast) technology, in 1993, and for bringing in a vacuum bright anneal furnace and multi-die drawing machine from Europe to beef up its manufacturing capability. According to a company executive, this advanced technology can purify copper alloys by greatly reducing lead and other substances, and enhance quality and durability by adding useful elements that restructure grain size and stabilize tensile strength. In addition, brass wires and rods produced by this process are easier to machine and harder to break, which helps end-users to boost production efficiency.

Yuang Hsian initially used the Upcast process to produce brass wire rods for the cold forging of fasteners, and then applied it in the production of its C2800 series wire rods, higher-end products specifically for EDM wire redrawing, in 2009. The company's current monthly capacity of EDM wires that pass AGIE Progress V3 exceeds 500 tons.

According to the company executive, Yuang Hsian religiously believes that its technological competitiveness hinges on advanced equipment, and so has constantly brought in state-of-the-art machines including Taiwan's first imported composition analyzer in 1970, an induction furnace in 1973, a semi-continuous casting machine from Japan in 1979, and the Upcast machine in 1993. The aim is to outstrip domestic peers and catch up with rivals from the advanced countries.

Yuang Hsian is also noted for its leadership in lead-free copper alloy production, which it claims measures up to standards established in Japan. The company began turning out lead-free brass products several years after it gained know-how about them through cooperation with Japanese counterparts in 2001. To continue holding the lead, the firm has built up a massive inventory of bismuth, a rare element that is desperately needed for making lead-free brass.

All of these efforts have borne fruit, as Yuang Hsian, backed by well-honed technology and ample materials inventory, is fully able to supply lead-free brass to customers from the optical component, medical and healthcare instrument, notebook PC, and other high-tech sectors.

Another strong driver of growth is zinc-coated wires for EDM, which have been adopted by printed circuit board makers since 2009 when the company set up a new production line for phosphor copper anode materials.