Emerging markets such as China, India and Brazil are pushing a strong rebound in Taiwan's plastics machinery sector, one of the world's largest, as the island's firms diversify in the wake of downturns in major developed economies.
Extruder maker Lung Meng Machinery Co. Ltd., for example, said sales rose 30 percent in 2009, to about US$85 million, as it expanded its markets and put more emphasis on China, India and North Africa, said President David Chen.
“American and European companies are still in a difficult position, but many companies in developing countries are not affected,” Chen said in a March 5 interview at the Taipei Plas trade show in Taipei.
Still, he said the 30 percent jump in 2009 sales surprised him.
“We diversified our markets. The business in North Africa increased unbelievably,” Chen said.
Lung Meng's success in 2009 is not typical, as industry figures show the global economic crisis hit hard, with Taiwanese industry sales falling sharply last year, down about 30 percent.
But Chen's comments about current conditions echoed others in Taiwan — that they are seeing a rapid rebound.
The Taiwan Association of Machinery Industry said the island's plastics and rubber machinery sector is expected to grow dramatically in 2010, reaching 90-100 percent of what it saw in 2008.
TAMI credited mainland China's massive government stimulus spending program, along with markets in Southeast Asia, India and Brazil, with fueling new orders.
Some others were more cautious, noting the threat of a bubble bursting in China's red-hot economy, which is still the biggest market for Taiwan.
David Wu, chairman of TAMI's plastics and rubber machinery committee, said the first half of the year could be a record for his company, press maker Multiplas Enginery Co. Ltd. in Taoyuan. Wu, who is Multiplas' general manager, added that 2010 sales for the industry as a whole could equal what they were in 2008. However, he cautioned that what will happen in the second half of 2010 is much too difficult to predict.
Agreeing, Chen said Tainan-based Lung Meng also will delay some orders rather than invest in new production capacity.
Industry executives also noted that customers worldwide are experiencing difficulties in getting financing.
There are signs of recovery but access to money remains tight, said Larry Wei, CEO of Fong Kee International Machinery Co. Ltd., a maker of blow molding and extrusion machines in Tainan.
“The demand probably is there ... but the financial situation in every country is more difficult,” said Wei. But Taiwan also struggles with funding for research and development, he added.
With just 22.9 million people, Taiwan has one of the heaviest concentrations of plastic machinery firms in the world — ranking among the top five or six in overall sales and exports with Japan, Germany, China, the U.S. and Italy.
Firms there now say their strategy is to strike a middle position between the best and most expensive equipment — coming from places like Japan and Germany — and lower-cost, general-purpose machines made in China.
With much of the world's plastics industry growth coming from emerging markets, that midrange focus seems to be working for now, said Bush Hsieh, director with PET stretch blow molding machinery maker Chumpower Machinery Corp. in Taichung. Hsieh is one of several vice chairmen of TAMI's plastics and rubber machinery committee.
Like Lung Meng, Chumpower saw its sales rise in 2009. Last year Chumpower's sales grew 15 percent, Hsieh said, with Southeast Asia, India, Brazil, the Middle East and Russia offering the most potential for future growth. He said Taiwan-made machinery is attractive to customers in the Middle East and Africa looking for good machines at good prices, including firms in Tanzania, Ghana and South Africa that are expanding in bottled-water and other businesses.
“They don't buy the cheapest machines,” Hsieh said. “They buy a reasonable machine at a reasonable cost.”
Chumpower also saw growth in the United States last year with a customer making pharmaceutical bottles that switched to the two-stage blow molding process using Chumpower equipment. But the company doesn't expect rapid growth in the U.S., Hsieh said.
Ted Chuang, sales director with injection press maker Fu Chun Shin Machinery Manufacture Co. Ltd., said Taiwan's industry learned a very painful lesson in 1997, when it was too dependent on a few markets in Asia and saw its sales drop sharply when Asian economies collapsed. The company has since worked very hard to diversify, he said.
“Our markets are all over the globe,” he said. “That was a lesson we learned in the Asian financial crisis in 1997.”
FCS, one of Taiwan's largest press makers, said its sales dropped in the first half of 2009 but began picking up midyear and rising quickly since then. The firm now has a backlog of about T$550 million (US$17.3 milion) in orders.
Its staff cut short its Chinese New Year holiday in February to fill business orders, the company said.
According to TAMI statistics, the biggest export market for Taiwan's plastics and rubber machinery industry in the first 11 months of 2009 was China, followed by Thailand, Vietnam, India and Indonesia. Those machinery exports totaled US$670.7 million for the 11-month period, a drop of nearly a 34 percent from the same period in 2008, when exports reached US$1.01 billion.
Rising exports to India, fueled by a trade dispute between India and China, have been a big shot in the arm to the Taiwanese industry, according to several machinery executives.
India's government in early 2009 imposed tariffs of up to 223 percent on Chinese-made injection presses, in a move to help protect its domestic machine makers. But the decision created a big opening for Taiwan, as the Indian market is buying several thousand injection presses a year, TAMI said.
“This really helped save many Taiwanese machinery companies,” said Multiplas Vice President David Chang. “I know several of them make their living on India.”
Before the Indian government decision, Taiwanese injection press makers “had practically given up in India” as mainland Chinese companies flooded in, Chang said. He said he believes it would be harder for India to bring anti-dumping actions against Taiwan because its local industry is smaller and lacks China's massive manufacturing capacity
While the tariffs are limited to injection molding machines, several Taiwanese firms making other types of plastics equipment said there has been a ripple effect of more Indian buyers looking at their machines.
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