There's a lot of talk these days about how the economic rise of the BRIC nations — Brazil, Russia,
India and China — is reshaping business. That came through loud and clear to me at the Taipei Plas show this month in Taiwan.
I spent the five days of the show talking to companies, and heard the same story over and over again: Sales to the BRIC economies and other emerging markets in the Middle East, Africa and elsewhere are driving a solid economic recovery for Taiwan.
That's good for Taiwan's plastics machinery firms, and its midpriced range of equipment, but what does it mean for North America, Western Europe or Japan?
Can those traditional centers of plastics equipment fully tap into that BRIC growth, or are places like Taiwan better positioned, with better price points, to profit long term?
I got back to my office in Guangzhou and looked at new data from the Japanese plastics industry, and it made me think the Taiwanese have a point.
Japan's injection molding press makers sold 12,600 units in 2008, but the bottom fell out and they sold fewer than 5,000 presses last year.
Sales revenue for Japanese press makers dropped more than 55 percent in 2009. Taiwan's machinery makers, meanwhile, said their sales “only” dropped 30 percent.
The Taiwanese tout that as evidence that they didn't fall as much, and more importantly, are recovering faster, than competitors in Japan and other developed economies.
Taiwan argues that it is better positioned, with the right price to performance requirements, for the emerging markets where the growth is now.
There's obviously not a lot of growth in the traditional markets. When I joined Plastics News in the late 1990s, the American injection press market was about 6,000 machines a year. Last year, it was a miserable 1,200.
Of course it will get better, and settle at some higher number. But what will be the “new normal”? 2,500?
I also wonder if Japan's new normal will be a lot lower. Japanese injection press industry sources I talked with are seeing some recovery, but data for November, December and January (the last available) suggest the Japanese industry is on pace to sell about 7,000 machines this year. One large Japanese machine maker estimates the industry will sell 8,400 injection molding machines this year.
That's better than 2009, but it's not anywhere close to 2008 or the 18,000 machines Japan sold in 2004.
It's certainly not the solid recovery Taiwan is claiming. Taiwan's machinery association said directly that 2010 could be as good as 2008. Japan isn't ready to say that.
Of course, there could be some false optimism from Taiwan's companies.
A hard landing for China's economy could really hurt Taiwan, and developed economies could recover in a year or two. As well, Taiwanese firms cannot match the best technology, and are challenged going head to head against Japanese all-electrics, for example.
But Taiwan's plastics machinery industry is very sizable (it's among the five largest exporters in the world), its businesses travel aggressively, and they have a strong government research partnership. That makes its BRIC-driven economic recovery worth watching.
Some American firms have a similar approach. One of them, Thermoforming Systems LLC, set up an Asian manufacturing partnership and said it's seeing rapid growth in emerging markets because it can meld its expertise with lower costs of making machinery in Taiwan.
Milacron Inc., as well, told me last year in India that their factory there saw strong sales in emerging markets like Africa, after it learned to modify its equipment and tailor its offerings.
What's it all mean? At the very least, you'd better dust of your emerging market strategy.
Toloken is Plastics News' Guangzhou, China-based Asia bureau chief.