Taiwan Hand Tool Industry Output Up 30.9% in Q3, 2010

With global demand for hand tools steadily growing, the Taiwan hand tool industry turned out NT$15.97 billion of tools in the third quarter of 2010, for a 30.9% growth from a year earlier or 10.8% from a quarter earlier, according to statistics compiled by the Taiwan-based Metal Industries Research & Development Center (MIRDC).

MIRDC statistics also show that the industry exported NT$15.15 billion of tools in the quarter, sharply up 38.7 year on year or 9.3% quarter on quarter as the second-highest on record, with 25.8% going to the U.S., 7.2% to Germany, 6.1% to China, 5.3% to Britain and 4.7% to Japan, with the five countries being the top-five buyers of Taiwan-made hand tools. Such exports to Germany, Britain and the U.S. rose 59.3%, 49.9% and 25.8%, respectively, indicative of solid demand in those markets.

Wrenches, adjustable wrenches, socket wrenches etc. contributed NT$3.37 billion to the total export revenue in the third quarter of 2010 as the most popular products, with tool sets making up NT$1.1 billion as the second-biggest category.

Also, Taiwan imported NT$1.25 billion of hand tools in the third quarter, up 10.4% quarterly or 62.9% yearly, with 49.4% from Japan, 32.3% from China, 4.5% from German, 3.8% from Vietnam and 2.9% from Italy, MIRDC's report shows. Saws were the largest import category during the period.

Sharpening Competitiveness
Industry operators have been tapping synergy to hone competitiveness over the past two years. For example and aiming to explore the global auto repair tool segment, Stand Tools and JP Power formed an R&D alliance with assistance from the MIRDC and Ministry of Economic Affairs, and debuted high-precision digital auto repair tool sets at a presentation in Taichung City, central Taiwan, in October 2010.

The innovative tool set presented included items jointly developed by manufacturers and the MIRDC, such as a digital torque wrench with an improved handle design, an extra thin ratchet handle, replaceable high-precision screwdrivers, LED-integrated telescopic pick-up tools and diagnostic tools.

M.H. Lin, a panelist at the presentation and director of the manufacturing department at Central Motor, the Taiwanese automaker of Lexus acquired by Toyota, praised the tool set, said that global demand for new cars has quickly recovered after the global crash, so Taiwanese hand tool manufacturers should focus on development of higher-end auto repair tools.

The MIRDC also noted that the hand tool manufacturers alliance will also include local automakers in the future, because user-supplier cooperation is conducive to development of upmarket auto repair tools, helping accelerate hand tool manufacturers to go global.

T-Team
Promoting “Unity is strength,” several local manufacturers and their subcontractors formed the “T-team,” to establish more positive image and capabilities for the industry as a prestigious supplier of higher-end, made-in-Taiwan hand tools.

Aided by the Corporate Synergy Development Center (CSDC), the T-team was formed by 14 companies on July 22, 2009 in Taichung, central Taiwan, aiming to be help alliance members to sharpen core competency through closer cooperation to cope with ever-challenging global markets. The members included two bigger “core companies” namely King Tony Tools Co., Ltd. and A-Kraft Tools Manufacturing Co., Ltd. and smaller but globally competitive partners such as Torque-Tech Precision Co., Ltd., Win Sam Industrial Co., Ltd. and Quan Tian Tools Co., Ltd.

One year later, Machan International Co., Ltd. and its subcontractors also joined to bring the total member number to 16 by July 2010, with Machan as Taiwan's leading maker of tool boxes and roller chests becoming the third core member.

With King Tony, A-Kraft and Machan respectively contributing experiences in marketing, e-management and manufacturing, the T-team will be better prepared to provide manufacturing and sourcing services to foreign buyers. The concerted effort is expected to help the sector in Taiwan enhance its global influence.

New THTMA Chairman
The 12th general conference of the Taiwan Hand Tool Manufacturers' Association (THTMA) was held on September 9, 2010 in Taichung, Taiwan's hand tool manufacturing hub, to elect the next chairman. Jack Lin, president of the largest Taiwanese screwdriver maker Yih Cheng Factory Co., Ltd., was elected without surprise. The vote was completely according to the rules of Taiwan's Civil Servants Election and Recall Act, which, Lin said, was the “most formal ever” in THTMA history, with secret ballots being cast.

Outlining his goals for the three-year tenure, Lin said exploring the Chinese market is a priority, stressing that the THTMA will enhance cooperation and information exchanges with its Chinese counterparts, such as the All-China Federation of Industry & Commerce and China National Hardware Association, to help local manufacturers better access the fast growing market.

“Taiwanese hand tool makers' opportunities of going upward to OBM (original brand manufacturer) are there as the market conditions are very favorable. Taiwan-made tools are attractive to Chinese consumers, due partly to reliability, competitive prices, and partly to historical, cultural, ethnic and linguistic ties between Taiwan and China, coupled with the cross-strait ECFA (Economic Cooperation Framework Agreement) effect,” said Lin.

The THTMA will also be more active to help Taiwanese makers go global, boost its influence by coordinating resources and efforts between the government and industry, added Lin.

Slowdown
After the first three quarters of very remarkable growth in 2010, MIRDC analysts noted that the industry's growth would likely slow in the fourth quarter for various reasons.

One reason is the sluggish market in the U.S. MIRDC's report shows that the Chicago PMI (Purchasing Manager's Index) slid to only 54.4 in September, while the Industrial Production Index also declined to its nadir of 56.5 since July, 2007; at the same time, however, the country's inventory index rose to 55.6 to hit the highest ever.

The MIRDC warned that the said leading indicators show an imminent economic slowdown in the U.S., which worries Taiwanese hand tool manufacturers about sales declines starting in the fourth quarter, especially when over one-fourth of Taiwan's hand tools were exported to the U.S. a quarter earlier.

The U.S. Fed's Quantitative Easing 2 has been also bad news for Taiwanese manufacturers, mainly because the policy has led to lingering appreciation of New Taiwan dollars in recent months since being announced in late August, which undermines Taiwan's export-dependent economy and local enterprises' performance, not to mention attracting more speculative capital into markets for raw materials. In other words, Taiwanese hand tool manufacturers will have to deal with skyrocketing steel prices in the future.

In other countries, economic slowdowns have also been forecast for the coming quarters since the beginning of the fourth quarter of 2010, with the hand tool industry's upbeat recovery to inevitably cool in the quarter, said the MIRDC.

The MIRDC said the industry's export value totaled NT$40.82 billion in the first nine months of 2010, 29.7% higher than the same period of 2009, and is estimated to exceed NT$53 billion for the entire year.

Taiwan Hand Tool Industrial Performance
	2007	2008	2009	Q3, 2010		2010 (estimated)
	Value	Value	Value	Value	Y-on-Y Growth	Value	Y-on-Y Growth
Output	59.04	59.45	46.34	15.97	30.9%	56.00	20.8%
Export	51.95	55.89	42.96	15.15	38.7%	53.00	25.4%
Import	3.88	4.29	2.81	1.25	62.9%	4.25	51.2%

Unit: NT$1 billion

Source: MIRDC

Economic Indicators in the U.S.
Month	May	Jun	Jul	Aug.	Sep.
OECD Leading Index	102.9	102.8	102.8	102.8	102.8
PMI	59.7	56.2	55.5	56.3	54.4
Industrial Production Index	66.6	61.4	57	59.9	56.5
Inventory Index	45.6	45.8	50.2	51.4	55.6

Source: MIRDC