Global Fastener News

2002 FIN – China Rapidly Approaching Taiwan’s Fastener Exports

November 26
00:00 2014

November 12, 2002 FIN – In the 1960s the fastener industry felt a shift toward production in Japan. In the 1980s more and more fastener manufacturing was moving to Taiwan. Now China is rapidly taking over the low-carbon standard fasteners business from Taiwan.

Bruce Darling of Porteous Fastener Co. reports that imports from China are approaching Taiwan’s tonnage. While Taiwan dropped from 54% to 50% of the PFC fastener imports, China rose from 31% to 40% last year. Darling predicts China may surpass Taiwan in the coming year.
Darling and Paul Lu, president of Luyon Corporation, led a group that included FIN co-publishers John Wolz and Ann Bisgyer on a tour of Asian fastener plants in September.
During his 20+ trips to China, Darling has visited 140 factories, including platers and packaging companies, and more than 30 trading companies.
Visiting the plants is part of assuring quality. “I want to see them making fasteners,” Darling explained. “We can see the material. We can talk to the operators.”
Darling has witnessed the evolution of fastener plants in China.
Chinese fastener plants are no longer small operations that are owned by the government. Gem Year was founded by Taiwan’s Jinn Her.
Today Darling ranks Gem Year up with Italy’s Fontana and Canada’s Infasco as among the world’s largest fastener plants.
China’s fastener manufacturing is centered in the Shanghai area. Historically, Shanghai was built on the trade of opium, silk and tea, and is now a modern financial center with a population of more than 15 million.
Shanghai is described by one travel book as a “pulsing metropolis with European architecture and a thriving café culture.”
One of the best examples of improvements in doing business with the developing China is transportation. It used to be a “four hour, pothole-to-pothole drive from the airport to fastener plants,” Darling recalled. Now he can reach most of the plants he visits in 30 minutes to 1.5 hours on freeways.

Moving from Taiwan to China
“More and more fastener production will be moving from Taiwan to China,” Lu commented. “More and more China manufacturers will be selling to the U.S. market.”
Lu is a Taiwan native. Since 1994 his trading company has been based in Torrance, CA, and almost 100% of his exporting to North America is from China. He is the official North American representative for Gem Year.
Just a decade ago the Chinese fastener industry was oriented toward domestic and European sales, because China uses metric fasteners, Lu observed. Then exports to the U.S. began.
However, China now is increasingly competing with the export markets as a customer for its own fasteners. With a population of at least 1.25 billion – and maybe hundreds of millions more – and an emerging economy, China is building hundreds of office and residential towers, factories, roads and bridges.
Shen Ren Chen (better known in the industry as “Glasses”), president of Ben Yuan Enterprises Co. Ltd., observed that the production move to China reflects not just low labor costs for competitively priced exports, but the potential for the Chinese domestic market.
Lu recalls that since 1989 some fastener factories have disappeared, because some were government owned and some just closed.
Darling added that Chinese investment in infrastructure is increasing, and so is the demand for construction fasteners and consumer products. Workers are now earning their own money and are developing “consumer interests” instead of going to a government store to get what is available. “That means a lot of refrigerators and hair dryers in the future,” Darling explained.
A disadvantage for China is that its steel mills “do not pay as much attention to the fastener industry” as China Steel Co. does in Taiwan. “They need to develop it yet,” Lu said in noting that raw materials account for 60% of Chinese fastener prices.
Darling said that the quantity of quality steel for low carbon is fine, but the quantity for medium carbon products Chinese steel “is not so large. There is now pressure to raise quality.”
Darling recalled that in the early days of sourcing many manufacturers didn’t understand quality requirements yet. “If you asked to see test reports, you might be handed yesterday’s test report.”
Today the QA labs are frequently in prominent locations near the front offices.
The rapid expansion of Chinese fastener plants came while the U.S. was working on its Fastener Quality Act. “The FQA umbrella was there, and they had to start that way. That had a positive effect.”

China’s Economic Development
Yu Wei Hua, vice director of economic development for the Jiaxing region, traced the transition from a farming economy to development zones created in 1994 to encourage foreign investment.
China learned that it is “very difficult to bring foreign investors other than from Taiwan,” because Taiwanese investors “have the same language and thinking” as the Chinese, Hua explained.
Hua said the Chinese government wants to bring in investors from all over the world. “It is a big change from the original China.”
The economic development team does everything from putting together interested parties to finding workers.
The government operates on the assumption that the new plants “will be here 50 years,” Hua said.
And Hua expects rapid development in the next five to seven years. ©2002 / 2014 Fastener Industry News.
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Touring the Plants … scroll below.

Touring the Plants
North Americans will see familiar names on the boxes in Chinese plants: Porteous, XL Screw, Heads & Threads, Fastenal, H. Paulin and others.
Though much of the process and machinery is the same, there are differences between the U.S. and China. Safety glasses, hard hats and earplugs are not automatic for visitors.
Several plants have large dormitories. At Tong Ming Enterprise Co. Ltd. workers come “from everywhere in China. New workers start on a three-month training program and then go to one-year contracts.
Eric Tsai said 70% of office employees have college training.

Tong Ming
Eric Tsai of Tong Ming Enterprise (Jiaxing) Co. Ltd. reported 2002 started strong, but sales have slowed.
Tong Ming specializes in stainless steel fasteners, wire and related products, and stainless prices have risen 25% this year.
Nonetheless Tsai said Tong Ming is investing in growth. It will open its own automated warehouse in February 2003.
Tsai said Tong Ming is looking for long-term orders and wants to be “the stainless steel manufacturer of the world.”
Thousands of apartments are under construction nearby to provide housing for the factories in the region.
Exporting can be tricky for the Chinese. Price is the major factor in selling to the U.S. Europe has some anti-dumping rules to navigate.
“Quality is not a serious problem,” Tsai remarked. Though Tong Ming has not yet been QS 9000 and ISO 14000 certified, customers “know our quality. The problem is price.”
Most of Tong Ming’s production is shipped to the U.S. and Japan. Korea and Vietnam also are significant buyers.
He anticipates increasing international sales. “The whole world will be one market. We do our best, and customers will come.”
Tong Ming produces 1,500 tons per month for the “growing domestic market.”
The plant is currently operating 12 hours a day, six days a week.
Tong Ming’s origins date back to 1978 when Tong Hwei was founded in Kaohsiung, Taiwan. Tong Ming opened a plant in Malaysia in 1989.
The 152,000 sq meter plant in the Jiaxing zone of China cost US$30 million in 1997 and specializes in stainless steel fasteners. The plant has 295 employees, including 191 in production, 79 in distribution and 10 in quality functions. Tong Ming has 15 distribution centers in China.

Gem Year
Chairman Y.L. Tsai started planning the Gem Year plant in 1995 as a sibling to the well-known JinnHer Enterprise Co. Ltd. of Taiwan. Production began in 1997. Jinn Her had previously established Chin Well in Malaysia.
Differences from North American plants are quick to spot. Rather than a large parking lot at the entrance, there are two dorms to house 400 men and 400 women. Gem Year cooks one metric ton of rice every other day to feed the dorm residents.
The average age of factory workers is 25. They come from rural China and return home just once a year.
Half of Gem Year’s 200,000-ton annual production goes to the domestic China market, and half is exported. Gem Year manufactures Hexagon head bolts and nuts, socket head screws, flange bolts, carriage square-neck bolts, tapping screws, drywall screws, and self-drilling screws.
Gem Year is moving toward the same automation that competitors in other countries are. Gem Year has a 40,000-pallet autopick warehouse and another warehouse under construction.
The company is moving into packaging and assemblies.
Gem Year emphasizes quality with ISO 9001, QS 9000 and A2LA signs prominently displayed on the plant and such slogans as “Quality is the result of intelligent effort.”
Another factory is planned across the street to produce automotive fasteners.
What is his biggest problem? “Not enough business,” Y.L. replied to the surprise of others anticipating the answer would be “price.”
In the coming five years Y.L. anticipates increasing sales efforts and upgrading product lines from low-profit/large-quantity items. “It is difficult to survive with low-price products,” Y.L. finds.
Lu cited Gem Year as an example of the change in Chinese fastener companies. “Ten years ago almost all were government owned,” Lu noted. Today a majority of new fastener plants are built by foreign investors. About 40% are constructed by Chinese investors.

Shanghai Ben Yuan Enterprises
Glasses opened Shanghai Ben Yuan Enterprises Co. Ltd. in February 1994 and has been operating at close to its 25,000-metric-ton annual capacity ever since. Business has grown 20% each year since 1997.
The factory in China operates independently from its Taiwan parent.
Glasses finds doing business in China has changed over the years. Traditionally it was difficult to obtain bank loans in China. “Chinese policy is now more stable,” Glasses explains.
Glasses said he doesn’t think it is worth expanding production of standard fasteners in Taiwan. Instead Taiwan will shift to producing higher-tensile-strength fasteners.
Glasses notes that you won’t see him at a North American fastener show or advertising in fastener publications. Ben Yuan produces “No Names” fasteners for importers and others to put in their own packaging, and thus he doesn’t need to personally sell in the U.S.
Glasses, a Taiwan native, said he went through a difficult three years establishing the Shanghai Ben Yuan plant. He sought to make it as independent as possible from his Taiwan businesses, but found it difficult to obtain loans from Chinese banks when he didn’t have connections.

Linkwell’s Fastwell in China
Kosky Yen started a trading company in 1977 when “there were not that many fastener factories in Taiwan.
He initially sold 55% to North America, 40% to Europe and the remaining percentage to New Zealand, Australia, Japan and Korea. He eventually opened Linkwell Industry Co. Ltd. to trade fasteners from Taiwan, and since 1989 he has traded fasteners in China at the Fastwell Industry Co. Ltd. He has a joint venture for locknut production in Thailand, known as Thailock Fasteners Co. Ltd., and he has joint ventures in Indonesia and China.
Yen credits the U.S. Fastener Quality Act for improving Asian products. His plants have ISO, QS and A2LA certifications.
“The FQA made us change,” Yen reflected. “Everyone improved themselves and added testing facilities.”
Kosky agrees that additional production of standard fasteners will move to China over the next five years, and Taiwan will turn to more specials.
He also anticipates OEMs will be customers in the near future instead of just importers.
Yen acknowledges the quality in China in the early 1990s “was very bad. Now they are changing. Machinery now comes from overseas. You can see the change.”
Even domestic fastener buyers are requiring higher quality levels, Yen noted. Ten years ago when the material for nuts was not good it would get rejected for exports but sold in China. ©2002 / 2014 Fastener Industry News.
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