Taiwan's Yacht Industry Sails Forward

To boost the development of local boating and watersports industries, the Taiwan External Trade Development Council (TAITRA) and Formula Ten Corp. of the U.K. held the first Taiwan International Boat & Watersports Show on Dec. 15-18, 2005 at the Taipei World Trade Center (TWTC) Exhibition Hall.

A total of 86 exhibitors, half of them from overseas, participated in the show.

According to TAITRA, the global ranking of Taiwan's yacht-making industry has risen in recent years-in 2005 Taiwan was the No. 5 yacht-making nation in the world, trailing Italy, the U.S., the Netherlands, and the U.K.

According to Horizon Yacht Co., the No. 1 yacht-making conglomerate in Taiwan, the island had a reputation as the "Kingdom of Yachts" in 1980s, but the major products manufactured here at that time were 30- to 40-foot small models. During that period, more than 300 related companies on the island generated annual revenues of over US$200 million.

The good times didn' t last, Horizon points out, as the New Taiwan dollar began sharply appreciating, greatly undermining local yacht makers' price competitiveness. Currently, there are only 20 to 30 yacht makers in Taiwan, but their total production value has recently risen due to their transition into the design and production of large-sized yachts, which have higher profit margins.

Chen Yu-min, president of Tachou Shipbuilding Co., Ltd., which was founded in 1919 and is the most experienced boat maker in Taiwan, points out that Taiwan yacht makers have lost their cost advantage in producing boats in large numbers, and thus have transitioned into the production of custom-made, luxury yachts. Today Tachou mainly produces high-speed yachts with lightweight hulls typically longer than 70 feet.

Rising From the Bottom

Taiwan's yacht-making sector dropped to its lowest point in 1994, when the industry only built about 228 yachts with an export value of US$75 million.

Better times have recently returned, however, as the global economy has recovered and the euro has sharply appreciated, boosting local yacht makers' price competitiveness. At the same time, the weak businesses in Taiwan' s yacht sector have been weeded out, leaving the 30 strong companies still building boats on the island.

In 2001, the annual export value of the local yacht industry rebounded to US$171 million, and the value has continued to increase over the past few years. Now, most local yacht makers are able to produce 80- to 120-foot yachts, most of which are custom designed and custom built.

According to industry sources, Taiwan yacht makers have lost their global competitiveness in the market for yachts less than 80 feet long because some large American companies have adopted standardized production processes to mass-produce low-priced 10- to 30-foot small yachts.

In the 40- to 50-foot sector, makers in mainland China hold cost advantages because of the low cost of labor there. Currently, more than 10 Taiwan-based makers of yachts smaller than 40 feet long have set up production plants in mainland China. Some Taiwan companies also produce 50- to 70-foot models, but these models often lack price competitiveness.

Statistics compiled by ShowBoats International, a luxury yacht magazine, show that Taiwan received orders for 44 super yachts (longer than 80 feet) in 2005, up 160% from the previous year, making the island the No. 5 yacht-making nation in the world. For 2005, the shipment volume for Taiwan-made large yachts is expected to outstrip that of the U.K. to take fourth place in the world.

In the first half of 2005, local yacht makers say, Taiwan took orders for 96 large yachts, lower than the corresponding figure of 108 recorded in 2004. Nevertheless, the yachts produced in 2005 were worth 10% more than those made in 2004, as their average unit price was 25% higher.

Industry sources note that most local shipmakers adopt steel and aluminum alloy to make their hulls, while yacht builders often use fiber-reinforced polymer (FRP) material. The FRP material has some advantages, including being easy to repair and maintain, but the manufacturing processes is known to release pollutants, and FRP can' t be recycled. This is why some local yachtmakers have turned to using steel and aluminum materials.

"For a nation that lacks specific yacht harbors, sailing zones, and population, " a yacht maker comments, "the sales performance here is quite good." He attributes the strong development of the local yacht industry to the island's strong furniture craftsmanship and comprehensive industrial infrastructure, which enable Taiwan-made yachts to parallel European counterparts in quality while selling at more competitive prices.

Taiwan's No. 1 Yacht Maker

Horizon Group is Taiwan's No. 1 yacht builder and also ranks No. 9 in the world. Horizon now employs about 800 workers in Taiwan, with the number expected to grow in the future. The company has also set up branches and subsidiaries in key overseas markets.

Horizon recently developed a 130-foot FRP super-yacht, which may be the largest in the world produced from that material, as the hulls of larger yachts are normally made of aluminum or steel.

Johnny Hsueh, supervising architect of Horizon's marine division, points out that his company delivers about 50 to 60 yachts per year, including 20 70- to 100-foot models produced by the flagship company, and about 20 to 30 50- to 70-foot models turned out by a subsidiary using different production processes. According to Hsueh, Horizon Group is also scheduled to set up another subsidiary that will focus on the production of yachts more than 100 feet long.

Horizon's yachts are 100% made in Taiwan, Hsueh points out, and they are globally famous for their custom designs and details. The group expects to continue producing yachts in Taiwan, Hsueh says, even though many counterparts have moved production overseas. Hsueh notes that those that have moved to mainland China have been facing problems in finding qualified suppliers for marine hardware, accessories, and production equipment.

Aritex, Taiwan' s Biggest Manufacturer of Yacht Parts

Andy Yang, chief financial officer (CFO) of Aritex Products Co., Ltd., a supplier of boat hardware and accessories, is very optimistic about the future prospects of Taiwan's yacht industry.

Aritex has been expanding its capacity over the past few years, and is constructing a new plant in southern Taiwan, which is expected to boost the company's annual revenue by an average of 40% in the first three years after completion.

Currently, Aritex is Taiwan' s only local marine hardware accessory maker that markets its products globally under its own brand (Aritex). The company accounts for more than 60% of the sales of these products in Taiwan, and also exports to many leading shipyards in the U.S. and Europe. Aritex now employs about 210 workers.

According to Yang, Aritex specializes in small-batch, large-variety production. The company has developed about 300 to 400 products, including bollards, engine mounts, water tanks, and TV cabinets. The company designs and produces products according to customers' original designs, or from Aritex's blueprints revised by customers.

"Orders have been filling all of our production capacity all year long, " Yang says, "which means Aritex has no need, and no intention, to move production overseas. All of our major rivals in Italy, Germany, and the Netherlands have not moved production overseas either, as the core competitiveness of companies in the yacht market lies not in prices but in the values they can create. "

"Aritex creates value, " Yang proudly claims. "We make general marine hardware and yacht accessories into works of art for higher value, rather than only into products with basic functions. That is a necessary way for local yacht-related makers to go, and our rivals in mainland China still fall about 10 to 15 years behind."

"I know that almost all major makers of yacht-related products in Taiwan are expanding their production capacity, " Yang says, "and the prices of their products are getting higher and higher."

Government Assistance

Taiwan's government is also actively cooperating with private makers in jointly developing the island's yacht line. The biggest example of this cooperation is the work of the Construction & Planning Administration (CPA) under the Ministry of the Interior to establish Taiwan' s first yacht-manufacturing zone at Shin Da Port in Kaohsiung County, southern Taiwan. With the CPA' s assistance, Shin Da' s designation was recently changed from a fishing harbor to a yacht harbor.

Industry experts point out that while large models now dominate the international yacht market, Taiwan' s yacht makers currently have difficulty moving their large, finished yachts to harbors from their inland plants. The new yacht zone at Shin Da Port is aimed at remedying that problem. The entire area for the projected special yacht-manufacturing zone is about 46 hectares, and the total investment for the zone is estimated at more than NT$1.5 billion (US$44.05 million at US$1: NT$33.3). Construction of the zone kicked off in October 2005 and is scheduled for completion within one year.

The zone is designed to eventually house some 15 yacht manufacturers, which are predicted to generate an annual revenue of about NT$10 billion (US$300.3 million). Currently, five domestic yacht builders have decided to move into the zone, including Vitech Marine Co., Bluewater Yacht Co., Tashing Yacht Co., Joyce Marine Co., and Dyna Yacht Co. Investment by the companies in the zone is expected to reach as much as NT$3 billion (US$90.09 million). Two foreign yacht makers also recently expressed interest in establishing yacht plants in the projected zone, as have local manufacturers of yachting hardware and machinery.

In the first stage of its development, the zone will focus on the production of sophisticated, large (more than 150 feet long), FRP-hulled yachts. The second stage will center on producing large yachts with hulls made of aluminum alloy.