Global Fastener News

2012 FIN – The Changing Face of Taiwan’s Fastener History

March 21
00:00 2014

November 19, 2012 FIN – What issues do Taiwan fastener manufacturers face?

During FIN interviews, four manufacturers in Kaohsiung mentioned issues that U.S. companies face too: Quality, currency, employee training and labor costs, competing lower-cost nations, trust and the global economy.

Tong Hwei’s Tsai: “There is no SOP for people.”
“I was born in a fastener factory.”
It may sound like the opening line of a Charles Dickens novel, but for Chu-Chien Tsai it’s practically true. Technically, he was born in a hospital, but he grew up in a small fastener factory where his family lived during the early years of Tong Hwei Enterprises, the company his father founded in 1978 with a single machine in Gang Shan, Kaohsiung, Taiwan.
You could say his career in the fastener industry was inevitable. As a child he spent a great deal of time in the factory. Once he had to be rescued from a water treatment tank he fell into. The family cleaned him up and got back to work, intent on building a successful company.
As a young man Tsai studied electrical engineering in Taiwan, then traveled to the U.S. to earn an MBA from Columbia University.
His transformation from factory kid to 21st century businessman complete, Tsai returned to Tong Hwei, where he is now president of a thoroughly modern enterprise. Tong Hwei’s 25-acre complex in Kaohsiung is outfitted with solar panels, an expansive park for employee recreation, and a Buddhist temple for the company’s 320 employees.
With a 6,000 MT/month capacity, Tong Hwei specializes in stainless steel fastener manufacturing, mainly from 300 series Austenitic stainless steel — also known as 18-8 stainless steel. Products include hex head cap screws, hex head lag screws, hex bolts, carriage bolts and socket head cap screws, along with stainless steel nuts. The company also produces specials.
Tong Hwei is equipped with an automated warehouse with barcode inventory control and capacity for 50,000 SKUs.
About 90% of its products are exported to the U.S., Japan and the EU.
Like most export-oriented companies, Tong Hwei was hit hard by the global economic crisis that struck in 2008. And the company’s end-markets have not healed equally.
To offset those declines, Tong Hwei is leveraging its reputation to pursue growth in South America and Russia.
Like many U.S. companies, Tong Hwei faces pressure from lower-cost producers in China and other developing countries.
But Tsai takes it all in stride.
“Competition is normal,” he insisted.
He said an essential element in global commerce is reliability.
“In the end to do business you need to trust each other. And trust takes a long time to build.”
Another issue Tong Hwei is grappling with involves a subject that has garnered national media attention in the U.S.: a skilled workforce shortage.
Tsai said manufacturing fasteners is not as challenging as managing workers. Buying new machines as demand improves is not a problem, Tsai said.
“Managing people is harder,” he said. “You still need people to operate the machines, and there is no SOP for people.”
The average machine operator at Tong Hwei has between seven and 10 years of experience. Considering that it takes up to two years for operators to work independently, filling new operator positions can be a daunting task.
“This is not a fancy job.”  Web: Tong Hwei Enterprises

Shih Hsang’s Ywa Industrial: “China is getting better”
“
Established in 1973, Shih Hsang Ywa Industrial Co., LTD. has weathered many business cycles over the years.
On average the Taiwan fastener market grows 3% to 5% annually.
Shih Hsang president Sherman Hong fondly recalls the heyday of the 1990s.
“During the Clinton years, growth was huge,” Hong told FIN.
When the global recession struck in 2008, Hong had enough business experience to think strategically. As the markets hit bottom in 2009, Hong made a critical decision. While many global manufacturers cut jobs, Hong focused on surviving the economic downturn with the core of his experienced workforce intact.
“In the downturn of 2009 were were able to reorganize our workforce and keep many of the younger workers.”
It’s a decision that has allowed Shih Hsang to meet growing demand for its fasteners as global economic conditions improve.
“We have a young group of guys that will run with us,” Hong told FIN.

 It’s an enviable position, given the aging workforce in Taiwan’s manufacturing sector.
Thirty years ago, Taiwan had a great technical training component to its education strategy, Hong explained. But then university degrees “came into vogue,” and the brain-drain from manufacturing hit the island nation in a similar manner to many Western countries.
“Finding workers is a huge problem,” Hong noted. “We can’t find them.”
To cultivate a better labor pool, Shih Hsang partnered with a Kaohsiung university to recruit talented young people. His company developed an apprenticeship program to give workers the skills they need to succeed in manufacturing. But the results have been disappointing, Hong explained.
“Once they finish, they almost always move on.”
But labor is only one pressure facing Hong’s business.
In the early years of the business, which was founded in 1973, Shih Hsang was the only manufacturer in Taiwan to produce both bolts and nuts, according to Hong. Since then, other Taiwan fastener manufacturers have developed to compete with Shih Hsang.
But Shih Hsang has done well, and continues to handle every aspect of production except plating. For that, Shih Hsang outsources to plating experts.
“Plating has changed dramatically in the last 20 years,” Hong told FIN.
These days, economic conditions are looking somewhat better for Shih Hsang and its 190-strong workforce. The U.S. auto market is predicted to grow through 2015, providing a “steady recovery” for Shih Hsang’s products.
Hong also sees light at the end of the U.S. housing market tunnel, which he said could experience growth of about 2.1% in 2012.
“That’s not bad,” Hong explained. “Europe is in the 0.1% region.”
But like other fastener manufacturers in Taiwan, Shih Hsang faces competition from fastener producers in China, Vietnam, Malaysia and India, who are slowly learning how to produce quality fasteners, Hong noted.
To remain competitive, Hong has invested in computerized European machinery so his company can produce higher value-added products, including specialty nuts — both hot and cold-forged.
In 2011 the company had sales of US$37 million. About 95% of Shih Hsang’s bolts and nuts are exported, with half of that amount going to the U.S. and 30% consumed by Europe.
While looking forward to celebrating a company milestone in 2013 — Shih Hsang will mark its 40th anniversary — Hong is mindful that Taiwan’s fastener industry is now in the same position Japan’s fastener industry was 30 years ago.

”China is getting better.” Web: Shih Hsang Ywa Industrial Co.
Ho Hong Works: Taiwan Has “Huge Advantage” Over China
Founded in 1973, Ho Hong has capacity of 20,000 MT/year and employs about 85 workers at its 185,000 sq ft facility in Kaohsiung. Major products include Grades 2, 5, & 8 OEM specials, with a range of 1/4″-1″ diameter to 12″ in length.
The company says it exports on average 60-65% of its products to Japan, 35-40% to the U.S. and 3% to “other”.
In recent months business has been down: 15% in July and 20% in August, according to company president Davis W.W. Leu.
But overall prospects are favorable, Davis told FIN. Ho Hong’s major export destination, Japan, enjoys a relatively stable economy, and Ho Hong’s workforce is stable thanks to “good overall compensation.”
Davis takes a different view of competition from China than some of his counterparts in Taiwan’s fastener industry.
Unlike China, Taiwan fastener manufacturers have a record of consistent quality on their side, “a huge advantage” over their Chinese competitors, according to Davis.
“Rising labor costs in China are keeping Taiwan fastener producers competitive,” Davis said through an interpreter.
Davis said that in Taiwan the workforce has a greater incentive to work hard so companies remain in business, while in China there is little worker loyalty.
“(Chinese laborers) can go work at a different factory down the street,” Davis told FIN.
In recent months Ho Hong has benefited from other market factors, such as a 15% decline in raw material costs, Davis stated. Such cost decreases, coupled with higher margins on value-added products, has allowed Ho Hong to increase its yearly sales even as its overall tonnage remains unchanged.
Not all costs have declined. Freight, for example, has increased as Taiwan producers compete with their Chinese counterparts for space on international freighters.
As a general rule, shipping to Japan is “much more stable” than exporting to the U.S., Davis told FIN.
Another advantage to the Japanese market is the general stability of the yen, which “doesn’t fluctuate as drastically as the U.S. dollar,” Davis noted.
Ho Hong enjoys a strong relationship with its customers in Japan, which has a culture deeply rooted in loyalty.
Davis said Japanese customers are willing to pay higher prices for a consistent, high-quality product.
Punctuality and reliable delivery are central to success in the Japanese fastener market because warehouse turnover is only 20-30 days instead of the three months more typical of U.S. customers, according to Davis.
But the Japanese market has its challenges as well.
Specifically, shipping to Japan requires fastener producer to stock several grades of steel in anticipation of what customers will need 30 days from time of order — too short a period to order steel after order is placed, Davis noted.
Taiwan fastener manufacturers have not been able to fully capitalize on their advantage in the European Union, according to Davis.
There is growing evidence that EU tariffs on Chinese fasteners have failed to slow the flow of exports from China to the EU.
Davis referred to an October email exchange between European Industrial Fasteners Institute president Anders Karlsson and Ho Hong Chairman Joe Chen, who heads the Taiwan Industrial Fasteners Institute.
Some members of the European Commission have gone so far as to question whether Taiwan is involved in EU tariff circumvention, a charge Chen denied.
In an email to the EIFI, Chen pointed out that the government of Taiwan recently restricted threaded fastener imports from China.
Also, the quantity of fasteners imported from China to Taiwan is a tiny portion of Taiwan’s fastener exports, and has remained steady in recent years — a trend counter to the transshipment charge leveled at Taiwan.
As Chen noted, Taiwan fastener producers would not risk their substantial trade with Europe to help China “cheat” duties.

Chu Hua Industrial: Taiwan Industry Sees ‘Dramatic’ Change
Taiwan’s fastener industry has changed dramatically since 2000, according to Chu Hua Industrial Co. sales manager Gordon Lin. Taiwan has adopted Western standards and matched steel quality, enabling it to keep up with the demands of its 21st century customers in the U.S., Japan and Australia.
This dramatic change has given Chu Hua an ongoing focus on quality.
Founded in 1974, the Kaohsiung-based fastener manufacturer is ISO 9002 and QX9000 certified by the A2LA.
In the early years, Chu Hua produced low carbon fasteners. Eventually the company improved its forging technique and quality, enabling it to manufacture high-grade parts while capturing of portion of the specials market.
Lin said Taiwan has a 50-year history of reliable cooperation with Western nations.
Like other fastener manufacturers, Chu Hua explored the idea of setting up a production venture in China. Lin said he wasn’t pleased with the conditions of operating there.
“We are not interested in setting up in China,” Lin told FIN.
In Taiwan Chu Hua enjoys a stable workforce, with many long-term employees who undergo yearly training to keep their knowledge and skills current.
But fastener producers in China face problems with inconsistent steel quality and a mobile workforce that make high-quality manufacturing difficult, Lin noted.
“You can invest in China but you can’t take money out of China.” Web: Chu Hua Industrial Co.  ©2012/2014 Fastener Industry News.
For information on permission to reuse or reprint this article please e-mail: FIN@GlobalFastenerNews.com.

Editor’s Note: FIN contributing editor Jason Sandefur toured Taiwan fastener manufacturers with Edgar Chen of Porteous Fastener Company.

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