Taiwan's Hand Tool Industry Is Pursuing Sustainable Development for The Next Decade

Taiwan’s hand tool industry is pursuing sustainable development for the next decade after surging between the 1970s and 1990s and maturing in the 2000s. Matt Yang, project manager of the Office to Revitalize Traditional Industries at the MIRDC (Metal Industries Research & Development Center), says the industry must keep progressing by developing niche products as its Blue Ocean strategy, a method first proposed in a book written in 2005 by W. Chan Kim and Ren?e Mauborgne, involving an uncontested market space or Blue Ocean where high growth and profits an organization can generate by creating new demand rather than competing head-to-head with other suppliers for known customers. Due to the uncertain global economy, the total value of tools produced worldwide in 2012 will drop to an estimated US$54 billion, including US$18.2 billion worth of hand tools, shows the MIRDC report; while budget-priced DIY hand tools command a majority share of the total, demand for professional tools will continue to grow steadily in the year, says Yang. Explosive Demand Explosive demand for auto repair and maintenance services worldwide will fuel stable growth of the professional tool segment. For example, Stanley Black & Decker has announced launching its sub-brand, Racing, to develop over 2,000 kinds of specific and standard tools targeted at China’s fast-growing auto repair and maintenance services market, says Yang. He adds the global marketing information services company, J.D. Power and Associates, also predicts surging demand for such tools in the future based on its global new-car sales projection for 2010. Professional tools for auto repair and maintenance are promising growth drivers for the Taiwanese hand tool industry, mainly because such products generate higher margins than DIY and household tools, and are persistently in demand worldwide despite a sagging global economy. Besides, the market is also accessible to most Taiwanese manufacturers who have ample know-how of manufacturing technology and quality standards. Market Trends Changing market trends are also creating business potential for niche products. For example, steady development of green power generation equipment and electric vehicles creates demand for specially-insulated tools with VDE certification, while the graying population globally also helps to buoy the market for lightweight hand tools. After years of efforts on improving functionality and quality of hand tools by switching to high-carbon and stainless steels from mild-carbon steel in production, Taiwanese manufacturers have built better global reputation for clamps, ratchet wrenches, screwdrivers, socket wrenches and sockets in recent years, according to Yang. But times have changed to be increasingly harsh mainly due to underselling by Chinese and South Asian competitors. Therefore Taiwanese manufacturers have to step up going upmarket to tap cross-industrial synergies, making sure efforts are directed in line with market trends, says Yang, who cites several emerging segments that can help to secure profitability in the near future. Surgical Tools Citing statistics compiled by Philip M. Parker, a chaired professor of the renowned graduate business school INSEAD, Yang says that an estimated US$118.986 billion of medical, surgical ophthalmic and veterinary instruments (excluding electrotherapeutic, electromedical and irradiation apparatus) were sold in 2009, with Asia absorbing a 30.9% share, Europe 26.5% and North America and the Caribbean 23.8%. The global market for such products will keep growing on average 4%, with production value to hit US$134 billion by 2012, according to INSEAD’s survey. Such business opportunity, especially in Asia, deserves Taiwanese manufacturers to explore, as demand in China, for example, is 1.5 times that in Japan, and accessible to Taiwanese makers due to shared culture and language, says Yang. Veterinary Surgical Instrument Alliance Commissioned by the Department of Industrial Technology under the Ministry of Economic Affairs, MIRDC gathered three benchmark hand tool makers, a veterinary chain, and a local national university to form the Veterinary Surgical Instrument R&D Alliance in 2009, which has developed some top-caliber surgical tools, including bone hammers, self-centering bone holding forceps, three-prone patella bone holding forceps, lane bone holding forceps, reduction forceps with serrated jaw and ratchet lock, etc. The tool makers and MIRDC jointly develop tools, needed materials and related manufacturing methodologies, with the university, MIRDC testing finished products in compliance with global standards, and the veterinary clinic field-testing to offer feedback for further tweaking. Surgical tools are 80% similar with typical tools in functionality and exterior, and are subject to U.S. FDA (Food and Drug Administration) regulations. The veterinary clinic and university help manufacturers with product improvement based on their professional knowledge and field-test-based feedback, which accelerates the alliance’s acquisition of FDA certification and time to market, according to Yang. The MIRDC decided to develop veterinary surgical tools for they are easier to be certified than those for human surgery, which helps the industry to venture into the niche market, Yang notes. Besides, the so-called Pet Economy has also grown worldwide, says Yang, citing sales in Taiwan’s pet market are estimated at NT$30 billion a year, with 25% of local families owning at least one pet, which is a huge consumer base for veterinary care; while the number of veterinarians increases steadily every year in Taiwan, generating stable end-user demand for surgical tools. Promising Yang notes that the alliance’s products were praised by international enterprises for fine quality and competitive prices at MEDICA held in Dusseldorf, Germany in 2010, when the MIRDC also arranged alliance members to visit German counterparts for further technology and business exchanges. Several German surgical instrument suppliers as Anton Hipp Gmbh, Dimeda Instrumente GmbH and Tontarra Medizintechnik GmbH have shown interest in cooperating with the MIRDC and the alliance to procure surgical tools from Taiwan, with Anton Hipp having already signed an MOU with the alliance for enhanced partnership and business opportunities in July 2011, says Yang, adding that the two parties have been discussing cooperative business model and product details. Surgical tools are an ideal niche that the industry can rely on for sustainable development because the lucrative market grows steadily and is open only to competitive players. Furthermore, Taiwanese manufacturers can access huge resources from local hospitals, universities and R&D bodies to apply key technologies, including human factor engineering based on CAD (computer aided design), CAE (computer aided engineering) and antibacterial coatings, which help to comply with FDA regulations and build marketability, Yang continues. Digital Power Tool Yang also sees potential in digital power tools, indicating that the PTM50 Pneutorque, a digital pneumatic torque wrench launched by the British company Norbar, incorporates high-tech electronics to be a trendsetting tool with higher torque precision, efficiency and margins. Some Taiwanese hand tool manufacturers have been focused on developing digital tools, progressing quickly in quality and functionality over the past few years to gradually gain global recognition. But Yang emphasizes that digital power tools are more complex in design, engineering than digital hand tools for they need miniature motors, micro sensors, IC chipsets, and embedded micro controllers, hence calling for better electromechanical engineering related to FPGA (field-programmable gate array)-based prototyping, SOC (system on chip) design, EMI (Electromagnetic Interference) testing, etc. Theoretically, Taiwanese hand tool makers can squeeze into the niche market, primarily because the island has mature industries of electronics and semiconductors and globally-competitive electromechanical integration technologies, which form the biggest competitive basis for local tool makers. But Yang concedes that only a few are capable of entering the market, for most are small- and medium-sized and lack resources to engage in R&D of higher-end products independently, and they do need teamwork and assistance from national institutions. However, Yang is still optimistic about Taiwanese manufacturers’ R&D capability, saying that development of digital power tools is under way. Wind-driven Opportunities Increasing constructions of wind turbines and solar farms globally also create new opportunities, for the green wave has generated considerable demand for lighter, high-precision and insulated, non-magnetic tools for repair and maintenance, says Yang. The market is also within arm’s length to Taiwanese hand tool manufacturers. Taiwan has huge potential for wind power, enough to motivate the government to push construction of wind farms. The local Industrial Technology Research Institute (ITRI) issued a survey indicating that wind blows across some 2000 square kilometers on the island at average 4 meters per second, which can drive wind turbines to generate 3GW of electricity a year theoretically. So far 268 wind turbines with 518-megawatt capacity have been constructed on 24 wind farms on the island, and the government plans to set up 600 more offshore wind turbines by 2030, making the MIRDC believe that demand for repair and maintenance tools for wind turbines will take off soon. Such professional tools are subject to UL1703, UL4703 and UL854 quality standards, and call for higher-grade metals as titanium alloy for lightweight and better corrosion-resistance, so the MIRDC is working with several hand tool manufacturers to develop related materials and technologies, including metallurgical engineering for special alloy steels, improved forging methods a warm temperature and coating formulas, notes Yang. EV Tools The steadily growing electric vehicle sector also generates demand for repair tools. Yang says that electronic components will be increasingly used in EVs, which call for dedicated tools with insulation and non-magnetic features. EV repair tools are regulated by EN/IEC 60900, ASTM F1505 and NFPA-70E standards. For instance, a tool with insulation rated 10,000 Vac/1500 Vdc and above meets related standards. Taiwanese hand tool manufacturers can tap the market jointly with local R&D institutions and colleges to develop non-magnetic composites as another growth driver for the next decade, concludes Yang. Source: cens.com