Electrical Auto Parts Taiwan Powers Up For Global Market Competition

With over two decades of long-term cultivation' stable development' and backing from a strong electronics industry' Taiwan is a leading production base of high quality' reasonably priced automotive electrical parts.

The domestic industry boasts over 700 firms of varying sizes' all connected to well-established central-satellite networks. Working together' they have made Taiwan a leading supplier of automotive electrical parts.

"Unlike many other industrial products' success in the automotive electrical-parts market depends on not only new products' but also on high quality and high precision to meet the specifications of the original designs'" says Lourdes Chiu' vice president of Fair Sun Industrial Co.' Ltd.' a leading maker in the line. "Our top concern is that all of our electrical parts are 100% accurate and trouble-free. There is no room for compromise or faulty operation. Quite simply the bottom line is quality."

The United States has been Taiwan's major market for large-volume orders' while Europe absorbs a lot of Taiwan's small-batch production of niche items. To strengthen their competitiveness' many domestic makers have split production between mainland China and Taiwan to meet these two market segments.

Some local analysts believe that the moves to the mainland are motivated by more than just production considerations. "They want to position themselves to expand in the mainland market' which is expected to boom over the long term'" says a senior official of the Taiwan Transportation Vehicle Manufacturers' Association (TTVMA).

Taiwan has several world-class players in electrical parts. Drawing on the local industry's globally renowned small-batch' large-variety production ability' long-term and intensive mold and die development' and comprehensive product offerings' many have expanded their businesses to include original equipment (OE) sales to big international automakers.



Original Quality


One example is Fair Sun Industrial Co.' Ltd.' an ISO9001-' QS9000- and TS16949-certified maker of electrical auto parts. Established in 1979' the company is one of the most experienced domestic makers in its class as well as one of the very few makers in Taiwan that provides such a wide range of fully self-produced electrical parts.

Currently' Fair Sun supplies over 1'000 items in different product categories for the aftermarket' including combination (headlight' wiper' and turn-signal) switches' headlight switches' ignition switches' relays' voltage regulators' starter regulators' and starter solenoids. The products are used in most American and European car and light-truck models.

In addition' Fair Sun is also an OE supplier to several big international automakers' including GM of the U.S.

The versatile maker exports all of its products to major markets including Europe' North America' the Middle East' Australia' and Latin America.

Fair Sun has developed a well-structured division-of-labor manufacturing scheme in Taiwan and mainland China. Currently' the company runs three facilities in Taiwan (with a total of 120 employees) concentrating on higher-margin items' while its subsidiary in Shanghai' mainland China--Shanghai Fair Sun Electronic Co. Ltd.' established in 1999--focuses on large volume orders and OE products.

Chiu claims that her company's core competitiveness lies in its comprehensive capability in mold and die development' jig and fixture manufacturing' and highly efficient assembly. In addition' Chiu points out' efforts in product diversification and cost-down have made Fair Sun a strong player in the competitive business.

In order to strengthen its hold on the U.S. market' Fair Sun provides a full range of headlights' ignitions' and dimmer switches for the American Big-Three car brands. In Europe and the Middle East' the company concentrates on production of electrical parts for trucks and buses. The company's truck and bus products are highly competitive in Europe' offering OE quality at a 30% discount compared to other makers.

"Few firms self-produce as many items as we do'" Chiu says. "However' this kind of business strategy is risky for companies without a strong backlog of orders and reputation for quality. The market is brutal. Customers may give their business to another supplier' especially those in Southeast Asia' due to the very thin price gap. This poses challenges for us in terms of our investment in mold and production equipment.

Fair Sun invests an average of US$3 million to develop around 30 new molds and dies each year. Currently' Fair Sun supplies electrical parts to many big international AM parts brands' including items for most of the popular car models in Europe' as well as Volvo' Scania and DAF trucks.


Superstore Selection


Unipoint Electric Mfg. Co.' Ltd. Which was established in 1972' also makes a wide range of electrical auto parts' including high-quality auto air-conditioning system parts and wiper products. The company is ISO9001- and QS9000-certified.

Unipoint also supplies starter motors' alternators' key parts for the two kinds' air-conditioning system parts' and high-end wiper blades.

Unipoint claims to be the world's biggest producer of aftermarket alternators and starter motors and parts. These products fit engines for almost all major Japanese' American' and European cars' trucks' and buses' as well as engines for boats' farm machinery' and other types of machinery.

The company now develops over 150 new alternators and starters annually at a cost in excess of US$2.9 million. Today the company offers more than 780 models of starters and alternators' along with over 3'000 parts. A company official claims that all of these products have quality commensurate with OE products in terms of specifications' functions' and durability.

The company's export market structure reflects this quality. About 40% of all production' including parts as well as finished products' goes to North America' 30% goes to Europe' and the remaining 30% is shipped to other markets around the world.

"One of the key factors in our superior quality is our high in-house production rate. We make over 90% of the parts and components in our alternators and starter motors'" says a senior company official. "Another factor is the unmatched development capability provided by our 60-plus member R&D team."

Among the key parts Unipoint makes in-house for its alternators and starters are solenoid switches' starter-drive gears' brush holders and armatures' stators' rotors for starter motors' voltage regulators' and rectifiers. Few companies in the line have such integrated production of both parts and finished products. This level of integration provides close to 100% in-house quality control. In developing these products' Unipoint's R&D team uses the same type of computer-aided design/manufacturing (CAD/CAM) software that is used by the leading automakers.

In the global aftermarket' the bigger a company is--meaning the more items it supplies--the stronger its competitiveness. The advantage that Unipoint in Taiwan is its efficient small-batch' large-variety model of production' which allows the company to compete with low-cost' large-volume competitors in other countries.

After gaining a firm foothold in the international alternator and starter market' Unipoint diversified into wiper blades in the early 1990s and then into air-conditioner parts (including fan/blower motors' fan assemblies' accumulators/receiver dryers' relays' and pressure switches).

These moves have paid off well for the company. Air-conditioning parts are Unipoint's fastest-growing line thanks in large part to the wide product selection and high quality of such items.

The company has a plant in northern Taiwan' and another in Shenzhen' Guangdong province in mainland China. The Taiwan plant turns out complete alternators and starter motors' while the mainland plant' with over 800 employees' produces wiper blades and air-conditioning parts.


Starting Your Engines


Another world-famous electrical-parts maker in Taiwan is Mobiletron Electronics Co.' Ltd.' which claims to be the world's most comprehensive suppliers of automotive ignition modules and alternator components including voltage regulators' rectifiers and diodes. Through constant investment in mold and die development' the company now supplies over 1'000 items used in nearly every kind of car and light truck in the world.

Committed to achieving the best' Mobiletron has won almost all of the major quality standard approvals' including ISO-9002' -9001 and -14001 as well as QS-9000. The company became listed on the Taiwan Stock Exchange in 2001.

After gaining a solid foothold in the auto-parts aftermarket' Mobiletron has been upgrading its business to become a second-tier supplier to automakers around the world. The company's products are widely adopted on used cars as well as new cars made in Taiwan' mainland China' Turkey' Iran and other nations. In Europe' Mobiletron is a major supplier to Delco Remy' one of the largest aftermarket auto parts brands there.

"There is a very high entry threshold in the electrical auto-parts market'" says Mobiletron sales manager Miriam Lu' "because the line requires constant' intensive and long-term investment in mold and die development in order to become a comprehensive supplier. Secondly' makers in the line have to pass years and years of strict quality tests to prove the reliability of their products. This second is more difficult since aftermarket parts need to work with devices that are already quite old."

Lu claims that Mobiletron is already very well qualified to become a second-tier supplier of electrical and electronic auto parts to automakers in the U.S. and Europe. "The supply chains in the American and European automobile industry are too rigid to break in a short time'" Lu claims' "but Mobiletron is trying to succeed in the two markets based on our overall competitive edge."

In order to win more second-tier orders' Mobiletron has invested heavily in the development of OE and aftermarket parts that are more durable' reliable and advanced than competing products.

Mobiletron is also leveraging its manufacturing strength gained from its cross-strait production mode. "Mobiletron has an almost unmatched global competitive edge due to the support of the strong electrical and electronic R&D/component industry in Taiwan and low-cost plastic and cast parts made at our mainland Chinese plant'" Lu claims. This combination' he says' will make it difficult for other companies to out-compete Mobiletron in the near future.

Aggressive international marketing has further contributed to Mobiletron's rise. Though newcomers face a tough time breaking into long-established supply chains in the U.S. and Europe' Lu predicts that his company will eventually succeed through a combination of determination' commitment and investment. Among all auto-parts makers in Taiwan' Mobiletron is one of the most active players in the international market. The company has set up a plant and office in the U.K. to provide direct regional technical' R&D and after-sales services to customers in the Europe' underscoring its ambition for a bigger piece of the market there.



Switching to OE Quality


Founded in 1982' the ISO9002- and QS9000-approved Chiang Bin Enterprise Co. has grown into Taiwan's largest manufacturer of starter solenoid switches and parts for internal-combustion engines. Today' the company supplies over 700 different solenoid switches for all kinds and brands of starters for diesel and gasoline engines used in cars' trucks' heavy-duty machines' construction machinery' and boats in the global aftermarket.

"The three key factors that enable us to overcome the fierce competition from both domestic and foreign rivals and help us to be a leading international supplier in our line are unmatched development capability' small-volume' large-variety production' and quality'" says company managing director' J.T. Chen.

Development capability' Chen explains' plays a key role in the aftermarket solenoid switch industry. "Product development in this business relies on more than just computer systems or blueprint-drawing machines. It also requires a combination of abundant experience' cost evaluation' strong support from satellite plants' and a group of talented experts who want to grow with the company."

The result' he notes' is the ability to create' at minimum cost' new models that closely resemble original-plant products.

The most difficult objective' Chen says' is to achieve the OE-grade quality and durability.

In-house development has also positioned Chiang Bin to enter new markets. Originally a producer of solenoid switches for mainly Japanese cars' it has expanded to European models as well as a greater variety of internal-combustion engines.

"Our small-volume' large-variety production mode also strengthens our international competitiveness'" Chen stresses. "By producing in small volume we can expand our customer base and avoid relying on only a few big buyers. And large variety makes us an ideal supplier of one-stop procurement."

The company currently operates two plants in Taiwan. One is in Taoyuan' in northern Taiwan; it has a monthly production capacity of about 25'000 units and concentrates primarily on solenoid switches and parts for European cars' as well as specialty items. The other plant is in Kaohsiung' southern Taiwan. Its monthly capacity is about 30'000 units' mostly starters for Japanese cars.

Although it already has a firm position in the market' Chiang Bin is relatively conservative about the development of new products. "We develop a new starter solenoid for a popular car model only three to five years after the car is introduced to the market'" Chen explains. "We never rush in too quickly' but wait for the market to mature."

Chiang Bin exports about 95% of its products to customers in Europe' the U.S.' and other markets all over the world. Just 5% of output is reserved to meet Taiwan's domestic demand. The company also supplies parts to a top-tier producer of automobile starters in the U.S. (March 2005)