The Production Value of Taiwan's Machinery Industry Will Approach The NT$1 Trillion Mark

Unless drastic changes interrupt the development of the global economy, the production value of Taiwan`s machinery industry will approach the NT$1 trillion mark this year. This prediction results from a study carried out by Huang Yu-chen, an industry analyst with the Industrial Economics and Knowledge Center (IEK), a unit of the government-backed Industrial Technology Research Institute. The study was commissioned by the Economics Ministry`s Department of Industrial Technology under the Industrial Technology Intelligence Services (ITIS) program. Production Value The results of the study indicate that the overall production value sill reach NT$950 billion in 2011, up 16.8% from last year. In the first quarter of the year, Huang says, machinery output reached a value of NT$200.094 billion, down 14.4% from the previous quarter but up 25.8% from the first quarter of 2010. The year-on-year increase was due to a constant influx of orders beginning in the second quarter of last year. IEK warns that the effects of the massive earthquake and tsunami have emerged in the second quarter of this year; Nevertheless, it projects a 19.2% year-on-year growth to NT$243.9 billion for the quarter. Next year the industry`s output value is expected to grow by 6%~9%, to more than NT$1 trillion. It terms of the production value of specific machinery categories in the first quarter, machine tools grew 31.2% from a year earlier to NT$31.2 billion; Thanks to an influx of orders from mainland China, production value for the whole years is predicted to increase 12.4% to reach NT$148.2 billion. It could even equal or exceed the record high of NT$150 billion. High-tech machinery has been one of the industry`s fastest-growing segments during the past few years. The production of high-tech machinery reached NT$22.3 billion in the first quarter, up 38.9% from a year earlier. For the whole year, the output is expected to expand by 6.4%, to NT$105.9 billion. Industrial machinery (including woodworking machinery, plastic and rubber processing machinery, textile machinery, food-processing machinery, printing machinery, chemical machinery, and packaging machinery) has, historically, recorded the highest production value of all machinery segments in Taiwan. The segment`s annual production value has topped NT$100 billion since 1965, hitting a peak of NT$180 billion in 2006. The expansion has slowed over the past few years, however, because of competition from Chinese manufacturers who have been rapidly penetrating the Asian and Latin American markets. The production value of industrial machinery amounted to NT$35.8 billion in the first quarter of 2011, up 12.7%; IEK predicts that the figure for the whole year will reach NT$169.9 billion, up 8.7%. The IEK study puts the production value of pumps, compressors, and valves during the first quarter at NT$16.2 billion, an improvement of 24.4% over the same period of 2010; Total production for the whole year is projected to reach NT$77.1 billion this year, up 18.9%. First quarter production reached NT$9.1 billion for conveyors, up 11%, and NT$443.2 billion for automation machinery, up 14.2%. The IEK notes that imports of machinery in the first quarter of this year reached NT$199.41 billion, up 5% from the previous quarter but down 1.4% from a year earlier, and predicts that imports for the year as a whole will inch up 0.9%, to NT$886.9 billion. Imports of high-tech production equipment amounted to NT$94 billion in the first quarter, up 8.9% from the previous quarter but down 22.9% year-on-year. The second-largest import category was industrial machinery (mainly distilling equipment, printing machinery, and glass-making machinery), totaling NT$32.8 billion, up 62% from Q1 of 2010. Imports for the year as a whole are projected to reach NT$147.9 billion, up 41.3%. The third-biggest machinery import category in the first quarter was pumps, compressors, and valves, with an overall amount of NT$21 billion, up 22.6% year-on-year. For all of 2011 the import value is expected to reach NT$89 billion, an increase of 14.9%. Imports of machine tools in the first quarter amounted to NT$8.3 billion and the annual import value is expected to reach NT$38 billion, for a growth of 25.7%. Imports of mechanical transmission devices totaled NT$7.3 billion in the first quarter, down 0.1% from the previous quarter but up 30.1% from a year earlier. For the year as a whole, imports are expected to grow 21.3% to NT$32.8 billion. Exports Taiwan exported NT$131.1 billion worth of machinery in the first quarter of 2011, up 31.5% from the corresponding period of last year. Overseas shipments for the year as a whole are expected to reach NT$558.2 billion, up 11.7%. In specific export categories, machine tools enjoyed the highest growth in the first quarter, growing 53.6% year-on-year to reach NT$32.9 billion. A slowdown began in the second quarter, but exports for all of 2011 are still expected to increase 11.4% to NT$130 billion. Exports of machine-tool parts and components are projected to reach NT$32.5 billion for the whole year, for an improvement of 35.4%. Industrial machinery recorded the highest export value in the first quarter, at NT$35.5 billion, an increase of 32.1% year-on-year. IEK predicts exports of NT$147.4 billion for all of 2011. Exports of mechanical transmission devices (the most representative items of which are ball screws, gears, and bearings) amounted to NT$8.1 billion in the first quarter, an increase of 37.4% from a year earlier; The figure for the whole year is expected to reach NT$31.7 billion for a 10.3% growth. Major Developments in the First Quarter Shortfall of machinery components following the Japanese earthquake: The earthquake, tsunami, and nuclear crisis that hit northeastern Japan on March 11 have interrupted the supply chains of manufacturing industries all over the world. Faced with this situation, Taiwanese machinery makers have strived to beef up their inventories and find European sources of key components. This boosts production costs and erodes profits, and the manufacturers are being forced to hike their prices as a result. Some have announced rises of more than 5% in the second quarter to offset the soaring cost of such components as ball screws, bearings, linear guideways, and computerized numerically control) devices. The ECFA effect: As a result of the signing of the Economic Cooperation Framework Agreement (ECFA) between Taiwan and mainland China, several world-class machine-tool and component manufacturers are planning to invest in Taiwan. The Okuma Corp. Of Japan, for example, is expanding its production lines in Taiwan, and the Fanuc Corp., Takisawa Machine Tools Co., Pross Enterprise Co., and Kuraki Machinery Co. Also want to increase their investment in the island. Forest-Line, a French manufacturer of machine tools, has expressed a strong interest in cooperating with Taiwanese companies to develop the pan-Asia market, and representatives of South Korea`s Doosan Group have come to seek M&A opportunities. ECFA provides a platform for foreign enterprises to enter the Chinese market through Taiwan, and China offers a huge market for Taiwan`s products and services. The zero-tariff provided by ECFA is a strong incentive for foreign manufacturers to invest in Taiwan as a springboard to China. Rising Chinese demand for high-priced machine tools: Average import prices for machine tools in China rose 18.45% year-on-year in the first quarter, according to statistics compiled by the Chinese customs authority, indicating a strong demand for high-priced machine tools. Chinese machine tool imports in the first quarter numbered 28, 813 units, up 37.32% year-on-year. At the same time, import value soared by 71.72%, to almost US$3 billion. China became the world`s largest importer of machine tools in 2003; It has an abundant supply of low-end machine tools from domestic manufacturers, but has to rely on foreign suppliers for medium- to high-end models, mainly from Germany, Japan, Taiwan, and Switzerland. The IEK believes that China`s demand for high-priced imported machine tools will continue rising because of the country`s need for state-of-the-art production equipment to upgrade its industries. Domestic output currently cannot meet the demand. Source: cens.COM