Mark Lin Is Well on The Way to Building Sustainable Development for The Industry

Following more than a year of hard work since his inauguration last September, Taiwan Hand Tool Manufacturers’ Association (THTMA) chairman Mark Lin is well on the way to building sustainable development for the industry. In an interview with CENS, Lin confirmed that his industry, which finished the first five months of this year with exports worth US$1.29 billion, has experienced a steady recovery from the impact of the financial tsunami. “Because of competition from Chinese rivals,” Lin conceded, “the industry’s export volume has remained flat this year. However, export value has been on an uptrend mainly because Taiwan-made hand tools are well received worldwide as higher-end products with reliable quality.” This indicates that the efforts of Taiwanese manufacturers to go upmarket are paying off, with large international brands, especially, resuming the placement of contract orders with them. Lin cited the return of contract orders from U.S. buyers, saying, “They had increased purchases of China-made tools over the past few years in pursuit of better profits, but that strategy resulted in more consumer complaints about poor product quality and jeopardized their brands. Some of them have stopped selling Chinese-made products or switched them to sub-brands to repair their brand image, and some have resumed cooperation with Taiwanese makers since the end of last year to assure reliable quality.” Driven by its high quality, the industry’s overall production value was estimated to be up by more than 20% in the first half of this year, Lin reported. For the second half of the year, Lin predicted that the industry’s growth will continue in the third quarter but will slow significantly in the fourth quarter, mainly because of the sagging consumer markets in the U.S. and Europe. Asked how THTMA will help local manufacturers cope with the growth slowdown and mounting worries about global economic recession, Lin answered that the association consistently monitors the market situation and provides manufacturers with up-to-date information, and that it has stepped up the exploration of new overseas markets to cushion the impact. Market Expansion and Diversification Despite its robust performance so far this year, the industry’s prospects are clouded by the lingering appreciation of the New Taiwan dollar against the greenback and rising material costs, which have eaten into profits. Realizing that the situation is unlikely to improve in the short term, THTMA plans to increase business visits to different countries to seek out overseas business partners and pave the way for Taiwanese hand tool makers to explore new markets and build growth sustainability. Early this year, THTMA and the Metal Industries Research & Development Centre (MIRDC) jointly organized a group of 6 Taiwanese top-end manufacturers to visit Miki City in Hyogo Prefecture, central Japan, one of the country’s most important supply bases for hand tools. This marked the beginning of Lin’s market expansion and diversification plan. The group included Lin’s own company, the Yih Cheng Factory Co., which is Taiwan’s largest exporter of screwdrivers. Proven Success The visit, which was designed to upgrade Taiwan’s position in the Japanese hand-tool supply chain, stirred up a buzz as the delegation was officially greeted by the mayor of Miki, the deputy prefectural governor, and local county councilors, and met with business owners and managers from more than 30 different local companies. “After several factory tours and meetings there,” Lin reported, “we noticed that many of the local industry people showed an intense interest in cooperating with Taiwanese manufacturers. They said that they are optimistic about seeing more business exchange between Taiwan and Japan, like our visit, in the future.” In addition to Taiwan’s globally proven manufacturing capabilities and good product quality, another main reason behind the business group’s success, Lin said, was that the dumping of China’s cheap, poor-quality tools in the Japanese market in recent years had prompted quite a few Japanese companies to look for alternative supplies. The group’s visit not only helped Taiwan’s hand tool industry to boost its image in Japan, but also inspired Japanese companies to enhance their partnerships with Taiwanese suppliers. The results of the visit also excited the government in Taiwan, where Executive Yuan officials are promising to provide all necessary support to THTMA’s efforts to boost such business exchanges with Japan, Lin said. He noted that his plan to explore the Japanese market will continue this October, when his association will send a second business group, to Niigata Prefecture, another hand-tool manufacturing base in central Japan. “We are confident of enhancing cooperation with Japanese counterparts on an OEM and ODM (original equipment design and manufacturing) basis,” stressed Lin. “Parts manufacturing will also be included.” THTMA has also been busy with market expansion and diversification in India, where the population tops 1.2 billion and the demand for professional hand tools has been increasing explosively along with the booming of the domestic electronic and auto industries. “We’ve already drafted a proposal in cooperation with the Taiwan External Trade Development Council (TAITRA), and have submitted it to Taiwan’s competent authorities for support,” noted Lin. “Hopefully, the first business delegation led by TAITRA will visit India next year at the earliest. We believe that our plan to establish a business platform with local Indian partners will soon give our industry access to that country.” Cross-Strait Business Exchange Shrugging off the increasing rivalry between the Taiwanese and Chinese hand-tool industries, Lin said that China is an indispensable part of his blueprint for boosting Taiwan’s presence in the global market. Since his inauguration last year Lin has repeatedly emphasized the importance of cross-strait business exchanges, in the form of cooperation between THTMA and Chinese business associations, aimed at helping local manufacturers grasp business opportunities there. So far this year, Lin reported, seminars and conferences for that purpose have been frequently held between THTMA and three large Chinese hardware and hand tool associations: the China National Hardware Association, All-China Federation of Industry & Commerce (Hardware and Electromechanical Chamber), and China National Hardware Electric and Chemical Products Commercial Association. “The outcomes of these exchanges are very positive,” said Lin, “Through the assistance of these partners, THTMA has effectively built business and image at local trade fairs, and has become increasingly known to the authorities there.” This kind of cooperation has also helped Taiwan’s hand-tool industry learn about the latest trends and market conditions around the world. Lin cited the example of the China National Hardware Association, which took part in the annual conference of global hardware associations held in tandem with the National Hardware Show 2011 on May 1-3 in Las Vegas, and generously shared information gained at the event with THTMA. “In fact, they [the Chinese partners] are getting more acquainted with the pulse of the global market than we are for varieties of reasons,” admitted Lin. “Last year the scale of the global market for hand tools amounted to over US$27.5 billion; China contributed US$8.344 billion to the total, which was about three times Taiwan’s contribution for the year. That’s why THTMA expects to draw on cooperation with them to expand the industry’s global foothold.” Brands Still Need Time Despite the fact that the Economic Cooperation Framework Agreement (ECFA) between Taiwan and China gives Taiwanese hand tool manufacturers an opportunity to bolster their own brands, Lin thinks that they have a long way to go to develop original brand manufacturing (OEM). ECFA reduces tariffs in China on five categories of Taiwan-made hand-tools--wrenches, pliers, hammers, screwdrivers, and other drilling, threading, and tapping tools—all of which posted significant growth in value in the first half of this year, as shown in the table titled “First-half Export Value of 5 Categories of Tools Subject to Preferential Chinese Tariffs, 2010-2011.” While the value of the exports expanded, the quantity remained flat, Lin pointed out, because of fierce competition from local brands and the high prices that come with better quality. As most Chinese consumers are price-driven and inclined to buy tools by brand familiarity, Lin went on, it will still take time to build up the market for Taiwan-brand tools there. Another impediment to brand-building by Taiwanese manufacturers is their inability to build up comprehensive product portfolios. Lin suggested that as Taiwanese manufacturers work to develop their own brands, they should continue competing on the basis of manufacturing capability and quality, and induce existing buyers to jointly explore the market. “Despite having a similar culture and language with China,” he stressed, “few Taiwanese companies have proven able to market and distribute their branded products independently in China. This doesn’t mean we should give up branding, but that we have to keep sharpening our competitiveness and taking advantage of existing distribution channels to expand market footholds as we wait to create opportunities for further development.” He pointed out that today’s efforts will pay off tomorrow, especially given China’s connection with the ASEAN bloc. Lin’s intention of boosting Taiwan’s position in the Asia-Pacific market makes a lot of sense, as hand-tool sales in the region (excluding Japan) increased at a compound annual rate of 9% over the past decade compared with a rate of 4.9% for Europe as well as the world as a whole, according to a report compiled by MIRDC. Continued Quality Enhancement In the face of the global economic uncertainty, Taiwanese manufacturers must continue to focus on their core competency, the development of quality; otherwise, they will be quickly routed in the increasingly price-driven competition from emerging rivals, stressed Lin, adding that “They should keep producing innovative, high-quality tools at home, where the supply and quality of raw materials such as steel and plastic are more stable and reliable than in China or other emerging countries.” Lin actively encourages Taiwanese companies to take part in international innovation and design contests such as iF, red dot, and G Mark. “With technological support from local R&D bodies,” he said, “more and more of our manufacturers are digitalizing their tools and developing higher-end composite materials to enhance the structural durability and lifespan of their products. Their achievements should be better publicized and promoted to the world through these globally respected contests.” Lin also has another noteworthy plan: the establishment of Taiwan’s first hand-tool museum in Taichung, where the island’s largest manufacturing base for hand tools is located. “The museum will be an educational marketplace,” he explained, “aimed at attracting more young people to work in the industry and demonstrating Taiwan’s capabilities to foreign customers.” In the first half of this year THTMA offered training courses for industry professionals, including CEOs and mid-level managers, at Tunghai University. “The courses were designed to help Taiwanese manufacturers introduce and carry out systematic management and turn their companies into efficient, world-caliber organizations that are better able to compete in the international marketplace,” Lin said. Lin has also organized a variety of other activities to enhance relations among THTMA members. “The aim of THTMA is to cultivate a positive atmosphere in the industry,” he commented. “This will help to inspire them to work more closely with each others in the future, and build brighter prospects for the industry.” Source: cens.com