Taiwan's Machinery Industry Grows Strongly But Worries About Chinese Controls

High growth continued for Taiwan's machinery industry last year, with production value rising to NT$501.4 billion (US$15.9 billion at NT$31.5:US$1). While this was up 11.17% from 2003, it was much less than the original projection of NT$530 billion (US$16.82 billion), thanks to the imposition of macroeconomic controls in mainland China last April.

These are the conclusions of the Industrial Economics & Knowledge Center (IEK), a unit of the government-backed Industrial Technology Research Institute (ITRI), which recently carried out a survey of the domestic machinery industry under the auspices of the Industrial Technology Department (ITD) of the Ministry of Economic Affairs (MOEA).

The IEK notes that about half of the machinery exported from Taiwan goes to mainland China. With the market there slowing down, how the local machinery industry performs in the near future will hinge largely on the development of the island's domestic economy.

IEK statistics reveal that Taiwan imported NT$675.7 billion (US$21.45 billion) worth of machinery and exported NT$418.1 billion (US$13.27 billion) worth last year, up 57.4% and 17.28%, respectively, from the year before. Most of the imports were put into use as production equipment for integrated circuits and liquid crystal displays.

In the overall structure of machinery exports in 2004, metal-cutting machine tools accounted for NT$54.3 billion (US$1.72 billion), up 30.64% over the previous year; metal-forming machines brought in NT$17.9 billion (US$568.25 million), an increase of 29%; textile and apparel machinery made up NT$35.8 billion (US$1.13 billion, a growth of 3.6%; plastic and rubber processing machines earned NT$31.8 billion (US$1 billion), a rise of 21.58%; and woodworking machines accounted for NT$24.2 billion (US$768.25 million), up 12.86%.

The total value of Taiwan-made machine tools in 2004, including metal-cutting, metal-forming, and electric discharge machines, topped NT$80 billion (US$2.53 billion) for the first time to reach NT$82.57 billion (US$2.62 billion). This was an increase of 28.1% from the NT$64.46 billion (US$2.04 billion) worth of machine tools turned out in 2003.



Order Slowdown



The IEK reports that many of the island's machine-tool manufacturers have experienced a slowdown of orders starting in the fourth quarter of 2004 because of the mainland's macroeconomic controls.

The domestic machine-tool industry, the IEK says, has been undergoing a 10-year production-value cycle since 1984. After reaching a peak in 1985, production began declining and bottomed out in 1990. Then it began to climb again, reaching another peak in 1995 before beginning another decline. The current cycle, according to the IEK, started in 2002 and is expected to peak this year. The organization predicts that production value will break the NT$100 billion (US$3.17 billion) mark this year.

The IEK survey shows that Taiwan imported NT$13.2 billion (US$419 million) worth of machine tools last year, up from NT$10.9 billion (US$346 million) in 2003. Major import categories were non-horizontal NC (numerically controlled) lathes, machining centers, and precision grinding machines.

Exports of machine tools to Turkey have increased every year since 2002, soaring from less than NT$1 billion (US$31.74 million) that year to NT$4.4 billion last year.

Mainland China remained the largest export market for Taiwan-made machine tools last year, taking NT$33 billion (US$1 billion) worth of the products, up 20% over 2003 and accounting for 46.1% of all overseas sales. Exports of machine tools to the United States and Turkey amounted to NT$5.8 billion (US$184.12 million) and NT$4.4 billion (US$139.68 million), up 39% and 59%, respectively.

Shipments to Thailand and India have doubled over the past three years, to NT$3 billion (US$952.38 million) and NT$1 billion (US$31.74 million), respectively.

While shipments of domestically made machine tools to mainland China have grown threefold over the past eight years, exports to the U.S. have fallen by half. The IEK notes that with the recovery of the American economy, however, shipments to that country began growing again last year.

The IEK urges domestic machine-tool makers to place more emphasis on emerging markets such as Turkey, Thailand, and India in their search for promising export outlets.