Taiwan Exports 3.7% More Hand Tools in Q2, 2009

With certain reports published in leading global newspapers saying that the recession is technically over, and others reporting surging growths in global trade over the last quarter since the financial meltdown, the IMF (International Momentary Fund) has been showing since this July its plans to revise upward its global GDP growth projection for 2010 to 3% from the current 2.5%, partly driven by the earlier-than-expected recovery of the global economy.

The IMF's upbeat intention reflects the slowing rate of global economic deterioration as of the second quarter of this year, with the U.S. reporting a better-than-expected GDP growth of -1% for the quarter, while Japan, Germany, France, Singapore and South Korea all seeing rosier pictures of next year's economy, sentiments buoyed by the recent, rapid rises in economic performance, which has been attributed by various observers to official fiscal stimulus measures, as the infrastructural projects and subsidized purchases of TVs and cars in China, cash-for-clunkers program in the U.S. and Germany. Such promising trend, whether short-term or otherwise, has been also influencing the Taiwanese hand tool makers, who have rallied back from a severe 6-month lull since the beginning of the fourth quarter of last year, posting growing production as of the second quarter in 2009.

Higher Quarterly Result

In the second quarter, the Taiwanese hand tool sector achieved production value of NT$12.1 billion (US$372.3 million at US$1: NT$32.5), 16.6% less than that posted a year earlier but 4.3% more than that a quarter earlier, the first quarterly growth over the past two quarters, according to the statistics compiled by the ITRI (Industry & Technology Intelligence Services) of the Department of Industrial Technology, under the Ministry of Economic Affairs.

Taiwan's hand tool sector also exported hand tools valued at some NT$11.1 billion (US$341.53 million) and imported NT$710 million (US$21.86 million) of such items, growing 7.1% and 23.5% respectively from those in the first quarter. Noteworthy is that the scale of the domestic market surged 15.9% quarterly to NT$1.71 billion (US$52.61 million), indicating that overseas demand has stayed relatively robust, helping to temper the effects of Taiwan's lackluster GDP in the recent three quarters.

The ITRI statistics continue to show that, regardless of the still struggling American economy, the U.S. remains the biggest customer for made-in-Taiwan hand tools, 31.7% of which was shipped stateside in the quarter, while Germany, China, Japan and Canada respectively bought 5.9%, 5.6%, 5.5% and 4.4%. Overall, the top five nations bought 53.1% of Taiwan-made hand tools.

Product-wise, some NT$6.7 billion (US$193.84 million) of general hand tools were exported, as well as NT$2.3 billion (US$70.76 million) in wrenches, making the two categories the top-two most popular with international buyers. Also, some NT$1.35 billion (US$41.53 million) in pliers, tweezers and similar tools were shipped abroad, with some NT$630 million (US$19.38 million) in hand-tool sets exported in the quarter.

Major Upgrading Strategy

Most insiders and operators in Taiwan's hand tool sector have been often reported to agree that an Achilles heel plagues the makers-very thin profit margins that tend to question the business sense of investments and hard work. One major move made during the second quarter shed new promise on the industry-one that is generally seen as one of the most effective ways to enhance global competitiveness and move upmarket by producing tools with potential for higher margins, not to mention creating a new niche in a saturated, often recklessly competitive market. The Taiwanese hand tool sector, backed by official efforts, formed the Veterinary Surgical Instrument R&D Alliance (VSIRDA) on July 15.

Following the textbook formula to tap resources from official agencies, academia and industry, the Department of Industrial Technology under the MOEA commissioned the MIRDC (Metal Industries Research & Development Centre) to motivate the formation of the VSIRDA, which boasts an enviable membership consisting of three benchmark hand tool makers, namely K&W Tools Co., Ltd., Kuang Yuang Industrial Co., Ltd. and Top Well Tools Industrial Co., Ltd.; the National Veterinary Hospital-the leading veterinary center in the country; and the National Chung-Hsing University (NCHU), a highly-rated university with Taiwan's only veterinary medicine department.

Founded in 1973, K&W is a pioneer in the hand tool sector on the island, supplying a huge range of saws to lead the segment. Kuang Yuang, established in 1972, specializes in forging, turning out a variety of forged stainless steel wrenches and pliers. Equally influential is Top Well, founded in 1982, who is well known for supplying nippers and universal pliers.

The inauguration of the VSIRDA at the Chung-Hsing University's Veterinary Medicine Department's Animal Disease Diagnostic Center marked a milestone for the hand tool sector in Taiwan, with the six inter-disciplinary members announcing cooperation to foster the development and promotion of Taiwan-made veterinary surgical tools.

T-Team

Such resource integration to help upgrade Taiwan's hand tool sector continued on August 22, when the "T-team" was inaugurated by 14 companies, with the teamwork aiming to achieve synergy within the industry that will help Taiwan's hand tool makers to better compete globally. The move makes sense, also driven by need as much as by desperation, in the increasingly smaller, globalized market with disparate intellectual property regulations that allow unchecked copycatting, turning the game played by those who follow time-honored rules into chaos.

Composed of two major operators and 12 supporting firms, the T-team is captained by King Tony Tools Co., Ltd. and A-Kraft Tools Manufacturing Co., Ltd., both globally famous makers of roller cabinets, sockets and socket wrenches, whose annual revenues totaled NT$1.2 billion (US$36.92 million) and NT$500 million (US$15.38 million) respectively last year.

Contributing about NT$2 billion (US$61.53 million) to the total production value of Taiwan's hand tool sector yearly, the 14 members are expected to further upgrade competitiveness via resource integration that will enhance production efficiency, according to industry insiders.

Core Mission

C.H. Su, president of Corporate Synergy Development Center, is the driver behind the formation of the T-team, notes that the production value of Taiwan's hand tool, power tool and pneumatic tool sectors has been growing 6% yearly on average since 2003, hitting NT$61.5 billion (US$1.892 billion) in 2008. Su says that the T-Team members have been focusing on sharpening skills and aspects of the sector that would otherwise be fantasy in the dog-eat-dog world of business. No longer idealistic slogans and mantras to be sung at corporate pep rallies, to enhance added-value in finished hand tools, emphasize global marketing, share materials and technologies to raise production efficiency of standardized parts are actually the core mission for the T-Team. (SC)

Production Value of Taiwan's Hand Tool Industry
Year	2006	2007	2008	Q2, 2009
				Value	Quarterly Growth Rate
Production Value	NT$55.57 b.	NT$59.04 b.	NT$59.45 b.	NT$12.1 b.	4.3%
Export Value	NT$51.95 b.	NT$56.09 b.	NT$55.89 b.	NT$11.1 b.	3.7%
Import Value	NT$3.59 b.	NT$3.88 b.	NT$4.29 b.	NT$710 m.	23.5%

Source: ITRI