After struggling through a tough 2005, the Taiwanese plastics machinery industry faces an uncertain future. Some markets show signs of returning; others are troubled, and the rise of mainland China poses both risks and opportunities.
Growth in consumer electronics, automobile and optical products likely will mean a rebound for injection press makers in 2006, industry officials said, while extrusion and blow molding equipment companies expect sales to drop.
Longer term, the industry needs to step up research and development spending or risk being swallowed by cheaper Chinese manufacturers on one side and high-end all-electric presses from Japan and Germany on the other, industry leaders said March 23 at the Taipei Plas trade show in Taipei.
``If we don't devote ourselves to research and development, the replacement of the Taiwanese industry by China will happen very soon,'' said Y.C. Hu, president of injection press maker Multiplas Enginery Co. Ltd. in T'ao-yuan, Taiwan.
Hu, who is also head of the plastics and rubber committee of the Taiwan Association of Machinery Industry, said the industry is launching a cooperative effort to develop Taiwanese-made all-electric presses.
Nine industry firms and the government plan to spend at least US$7.5 million over the next two years on joint research, he said.
Still, the Taiwanese industry did achieve a predicted breakthrough in 2005: It moved up one place in global machinery exports, becoming the fourth largest exporter of plastic equipment, after Germany, Japan and the United States.
That came even as the total value of Taiwanese exports shrank slightly, to about T$30.4 billion (US$950 million), as demand dropped in China, which accounts for 40 percent of Taiwan's exports, and in Thailand, India, Turkey and Russia, Hu said.
Taiwan was able to see sales go flat and still supplant Italy because that country became less competitive after it adopted the euro, he said.
In the same way, he said, ``Taiwan's machinery makers should be alert'' to the dangers of not staying competitive.
``Chinese machinery producers have grown stronger and more competitive each year with the full support from the government,'' Hu said.
Still, he predicted that the near future does not look too bad for the injection press industry.
It will see 5-10 percent growth in 2006, which Hu called a conservative estimate, because of growth in consumer information technology products such as very small MP3 players, double-digit increases in auto markets in China and other Asian countries, and continued strength in molding for opto-electronic products, he said.
According to figures from TAMI, the total value of Taiwan's plastic and rubber machinery production in 2005 was T$37.2 billion (US$1.19 billion). Value and total tonnage figures both were less than 2004 figures but significantly greater than those for 2003. More than 81 percent of the machines were exported in 2005, he said.
Blow molding and extrusion equipment makers expect 2006 to be worse.
Those segments will see production and exports drop 10 percent this year, due to both mainland China tightening its macroeconomic policies and to instability caused by higher resin prices, said Larry Wei, the executive supervisor of TAMI and president of extruder and blow molding machine maker Fong Kee Iron Works Co. Ltd. in Tainan, Taiwan.
China is the only market where blow molding and extrusion markets will grow, because of foreign and Taiwanese companies setting up factories there, he said.
The Taiwanese industry also needs to be alert to the copying of its designs by Chinese manufacturers, Wei said.
He said a Chinese firm copied one of his company's blow molding machines, duplicating every detail down to the instruction manual, changing only the company name and address. But the copycat was not able to duplicate the software and other more sophisticated controls, which still gave Fong Kee an edge, he said.
Taiwanese firms can maintain competitiveness by focusing on software and information management systems that let workers share information with each other globally and be more responsive, Wei said. As well, he said companies should keep research and development in Taiwan.
Hu made a similar point: Mainland China has low-cost advantages, but Taiwan's strength is better machines, more comprehensive solutions for customers and better peripheral products.
``Taiwanese producers are facing strict competition from China, and the strong copying ability of Chinese producers makes the situation worse,'' Wei said. ``It is vital for us to keep highly alert not to get copied when selling products in China, otherwise we are actually killing our future.''