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March 29, 2010 02:00 AM

Government boosts spending on plastics R&&D

Steve Toloken
Assistant Managing Editor
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    Taiwan's plastics industry is betting big that a focus on research will help it find a competitive path between the huge numbers of lower-cost machines coming out of China and the top-end, high-priced ones from traditional strongholds like Germany and Japan.

    Industry and the Taiwanese government are looking to increase research spending and form new partnerships and Europe's down market has made it cheaper for some firms to snatch up good research talent, according to sources interviewed at Taipei Plas, held March 5-9 in Taipei.

    For example, a group of machinery and mold-making firms located in Tainan, Taiwan, last month launched a partnership to build stronger links with plastics researchers at 10 universities and garner more government research grants, said Larry Wei, chairman of that research alliance. Wei is also president of Fong Kee International Machinery Co. Ltd. of Tainan, which manufactures blow molding and extrusion equipment.

    Called the Taiwan Exquisite Machinery and Mold Strategy Alliance, the group comprises about 70 companies, including large Taiwanese injection press makers Fu Chun Shin Machinery Manufacture Co. Ltd. and Chuan Lih Fa Machinery Works Co. Ltd., he said.

    “The Taiwanese government has many research funds that can be applied for,” said Wei. He said companies want to do work in a range of areas including management systems, materials and equipment.

    Plastics are one of five industries that the local Tainan government has targeted to support. Automotive parts and bio- technology are two others, Wei said.

    Taiwan's government also has increased spending on one of its main plastics research centers, the Plastics Industry Development Center in Taichung. The center, which receives funds from both industry and government, has roughly doubled its budget to US$13 million since 2006 and boosted staff 50 percent to almost 200.

    The government spending is part of an effort to expand research support for “traditional” industries like plastics, bicycles and precision machinery, to help them remain competitive and generate jobs, particularly in the economic downturn, said PIDC director Michael Lin.

    The economic downturn among European plastics machinery firms also seems to be benefiting research efforts in Taiwan.

    Extruder maker Lung Meng Machinery Co. Ltd. has hired several Italian consultants to work on improving its equipment, and because of the tough global economy, Lung Meng is likely paying them less than it would have five years ago for similar work, said David Chen, president of the Tainan-based firm.

    Although Chen was worried by the economic troubles hitting machine makers in Germany and Italy, he has drawn a lesson from the situation, he said: Those firms spent too much money developing machines that, while very good, were ultimately too expensive for the market.

    So, Chen said, Lung Meng is focusing R&D on improving its equipment in areas like pre-stretch film and keeping it aimed at the “right price point.”

    Commercializing research can be difficult or, at least, requires great patience, judging by a long-standing Taiwanese project to develop all-electric presses with only local components.

    At Taipei Plas in 2008, the industry unveiled results of a joint government-industry project to make a Taiwanese servomotor — a key component in all-electric machines — to replace the Japanese and German motors that Taiwanese firms typically buy.

    The idea is to take advantage of Taiwan's lower costs to build the increasingly popular, energy-saving all-electric machines.

    While work continues, it may be too soon to determine whether the project is a commercial success, several industry executives said. Some firms that helped fund the research say they continue to use Japan and German servomotors for some of their equipment, as Taiwan motors are still developing.

    “We still have a strong will to adopt the Taiwan servo but we cannot wait,” said John Hsieh, a vice manager at Fu Chun Shin.

    Hsieh said it will take time for to develop the servos but he thinks the project can succeed.

    Another industry executive said the servomotor project faces significant competition from Japanese firms, which have moved assembly of entry-level, mass-produced all-electrics to China to reduce costs.

    David Chang, vice president of Multiplas Enginery Co. Ltd., said Japanese firms also enjoy a cost advantage because they buy servomotors in bulk — several hundred at a time. That can equal discounts of up to 40 percent, compared with a 5 percent discount common for Taiwanese firms with their smaller orders.

    “With a 40 percent cost disadvantage on a key component, no matter how good your management is, or how efficient you are, you cannot overcome the 40 percent cost difference,” Chang said. Instead, Taiwanese firms should focus their all-electric efforts on specialized applications, he said.

    Also at Taipei Plas, Taiwanese and mainland Chinese machinery firms held their second formal summit to discuss joint development possibilities, said David Wu, chairman of the plastic and rubber machinery committee of the Taiwan Association of Machinery Industry — a show organizer.

    The Chinese firms are interested in learning about the research partnerships between government and companies in Taiwan, Wu said.

    Liao Zheng Pin, who heads the China Plastics Processing Industry Association, said Taiwan's design capabilities could be combined with mainland China's massive production capacity for an added global advantage, according to a statement from show organizers. But some Taiwanese executives cited the problem of intellectual property protection in mainland China as a hurdle to such partnerships.

    Copyright 2010 Crain Communications Inc. All Rights Reserved.

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