Taiwan's Metal Furniture Makers Gear Up for ODM Production

Between low-cost rivals and rising material costs, Taiwan's metal furniture makers are finding profits increasingly elusive in their once mainstay OEM (original equipment manufacturing) business. Many have responded by moving to cheaper production sites, notably mainland China, but others are sticking it out, and succeeding by adding value where others are cutting costs.

A clear indication of this trend is the shift to ODM (original design manufacturing) production, which puts manufacturers in Taiwan in a better position to distinguish their products from the more generic bargain-basement wares of competitors in China and Vietnam. The strategy is paying off by adding value and winning over foreign buyers with better quality and more unique designs.

The success of the ODM strategy is also reflected in the export figures. In 2006, Taiwan exported NT$50.7 billion (US$1.56 billion at US$1:NT$32.5) worth of furniture, with metal furniture accounting for the largest proportion of US$380 million. The U.S., Japan, the U.K., China and Germany remained top five countries among Taiwan's export destinations for furniture during the period.

In 2007, the output value of Taiwan's furniture industry is expected to have grown by 1.51% to US$1.587 billion, further indicating that the industry is recovering.

Dedication to R&D

One supplier who is dedicated to turning out high-end metal-made K/D furniture on an ODM basis is Kadeya Enterprise Co., Ltd., founded in 1993 in Changhua County, central Taiwan.

Kadeya began by selling furniture as an agent in Taiwan, and later on turned to specialize in making metal K/D furniture mainly on an OEM (original equipment manufacturing) basis and partly on an ODM basis.

In addition to metal, Kadeya uses a variety of other materials, including PP (polypropylene) plastic, zinc alloy, aluminum alloy, glass and wood in its stylish furniture items. Kadeya exports all of its products, including tables, computer tables, display shelves and chairs, with 80% going to Japan and 20% to the U.S. and Europe.

Lay Jiunn Yih, president of Kadeya, says that his company's K/D metal furniture is quite popular in Japan due to its high quality. "Japanese clients come to our plant to see if we can meet their production capability and capacity requirements before placing orders. So you have to be totally ready if you want to become a supplier for Japanese clients," Lay says.

Quality aside, Kadeya's success is a product of dedication to R&D. Lay says that his company has been developing high-end furniture that harmoniously combines two or more materials to improve appearance and functionality.

Its metal-tube meeting table, for example, has a glass top and is designed with a sophisticated, patented rabbet structure that enables assembly with no more than four screws. The structure is also more durable and steady than competing models requiring more screws. "The combination of metal and glass gives the table a compact form and the special structure improves durability," Lay says.

R&D has also helped Kadeya to cushion the impact of skyrocketing metal prices. "We don't raise the price of our existing furniture lines when material costs rise. Instead, we introduce new high-end furniture that our clients are willing to pay more for."

Kadeya has also rolled out a series of green furniture products made with 80% recycled paper. The environmentally-friendly furniture has been exported to the U.S. and Europe.

The company is also developing an electronic table, which, Lay reveals, has been certified by SGS and related international standards. The high-end electronic table is scheduled to debut in the fourth quarter of 2008.

Lay believes that furniture suppliers may be swept under by the tide of globalization if they neglect R&D. "No matter how much work we've put in, Kadeya continues to do its best to succeed."

Compact Form

Another ODM KD furniture maker is Chang Fu Precision Co., Ltd. Established in 1995 in Changhua County, Chang Fu specializes in making compact metal furniture.

Chang Fu was founded as an OEM metalworking service provider. In 1999, it diversified into manufacturing stainless steel K/D cabinets and racks mainly for bathroom use. The company today supplies a wide line of mid-market and high-end K/D cabinets on an ODM basis to the U.K, Germany and Japan.

Jane Wu, sales manager of Chang Fu, notes that the company focuses on structural improvements and stylish designs when developing new K/D furniture. "Everything we sell is easy to assemble," Wu says. "For example, our storage boxes, can be assembled in one minute and doesn't require any screws."

Extendibility and colorful exteriors are other selling points of Chang Fu's boxers, Wu says. "The boxes can be put together to increase storage space." Wu says that storage boxes are well received in the Japanese market because their colorful hues make them a decoration addition to the home. She notes that the company will introduce other colors for different markets, noting that the Japanese prefer warm hues, while Europeans prefer colder hues.

Wu notes that Chang Fu's K/D furniture has no welded surfaces in order to present a smooth appearance.

Chang Fu's R&D team attends major furniture exhibitions around the world to get new product ideas and information on market trends, says Wu. Its efforts to add value through fashionable design have proven a successful strategy in the global market.

Wu indicates that Chang Fu will continue developing new products for the global markets and will focus more on export orders. "Chang Fu has the extensive experience and mature technologies to succeed in the K/D furniture market," she says.

R&D by Market Demand

Established in Changhua County in 1981, Tair Wei Enterprise Co., Ltd. is also dedicated to market-directed R&D.

The company applies its strong production capability in hardware and metalwork to turn out a broad line of K/D metal furniture, including dining sets, bathroom racks, kitchen racks, computer desks and TV cabinets, mainly on an OEM basis.

Tair Wei has an integrated production line, but farms out painting and electroplating processes. By doing most of its own production, the company is able to tightly control product quality, according to Lin Chiu-sung, general manager of the company.

This commitment to quality has earned Tair Wei an ISO 9001 certification. "Before starting mass production, we research the production processes and make sure that the new products are precisely sized," Lin says. "Also, we conduct a trial production run and then test the structure of new furniture."

Tair Wei's dedication to R&D has helped the company stay close to the pulse of the market. Lin notes that his company exhaustively studies the market demand to guide its product development work. At present, that means increasing focus on ecologically sound products and elimination of all toxic substances prohibited under international standards.

"We customize our products as much as possible to meet the different demands of each market," Lin says. "We have over 20 years of R&D experience," he adds, noting that this has enabled his company to develop a comprehensive and market-tailored product line.

On-time delivery is another asset that has helped Tair Wei compete successfully against rivals in the global market. "We try to adapt to the quickly changing market all the time, with an ultimate goal of attaining the best balance between quality and prices of our furniture," Lin says.