The machinery industry cluster in central Taiwan’s Taichung City is helping local companies hammer out a reputation for innovation and quality.

Edward Yang (楊德華) founded Goodway Machine Corp. in 1975 in central Taiwan’s Taichung City. In the beginning, he had just two employees, both of whom spent their days making metalworking lathes. More than 40 years later, he runs four companies that manufacture and market high-tech automated machining centers, as well as advanced lathes called computer numerical control (CNC) turning centers. Yang employs around 1,500 professionals and sells his products in 43 countries and territories.

“I’ve witnessed to the development of Taiwan’s machinery sector and seen the formation of the industry cluster in Taichung,” he said. “Today, the city has a well-rounded supply chain with the up-, mid- and downstream sectors complementing each other. This is a key driver behind the competitiveness of the local industry.”

Taiwan is home to some 13,000 machinery factories that employ about 470,000 people. Many of these facilities are located in the so-called Golden Valley, an area spanning roughly 60 kilometers around the base of Mt. Dadu in Taichung. The region boasts the highest density of machinery plants in the world.

According to tallies compiled by the Taiwan Association of Machinery Industry (TAMI), the production value of the nation’s machinery sector reached approximately NT$990 billion (US$32.8 billion) in 2016 and is projected to grow 5-10 percent this year to break NT$1 trillion (US$33.1 billion). About 70 percent of the items produced are exported.

Employees work on the factory floor of Yeong Chin Machinery Industries Co., a leading supplier of high-performance computer numerical control turning centers, in the machinery industry cluster of central Taiwan’s Taichung City. (Photo by Chin Hung-hao)

Locally Sourced Solutions

Taiwan is the world’s fifth largest exporter of machine tools behind Germany, Japan, Italy and mainland China. It is also among the top 10 exporters of rubber and plastic, textile and woodworking machinery. Much of this success, Yang noted, can be attributed to the Taichung cluster. The business owner said such a grouping increases operational efficiency and productivity. It also facilitates a clearer division of labor and specialization while consolidating resources and reducing production costs.

“The benefits generated by clustering enable Taiwan’s machinery manufacturers to churn out products with excellent cost-performance ratios,” Yang said. “They’re also the main reasons manufacturers stay in Taiwan instead of relocating overseas.” The Taichung cluster, he added, serves as a one-stop shop where international buyers can get what they want conveniently and quickly.

Around 70 percent of the components and parts used by Yang’s factories, including ball screws, hydraulic cylinders, tool changers and water coolers, are sourced locally. Additionally, his business group has established long-term cooperation in R&D with Taichung-based institutions and organizations such as Hsiuping University of Science and Technology and National Chung Hsing University, as well as the Machine Tools Technology Center under the state-supported Industrial Technology Research Institute (ITRI) and the Precision Machinery Research and Development Center (PMC), founded by the Ministry of Economic Affairs (MOEA) and TAMI in 1993.

Reputation for Quality

Habor Hsu (許文憲), chairman of the Precision Machinery Development Association, said the country’s machinery manufacturers, which are largely small and medium enterprises, must continually improve their technologies to create value-added products and deliver better solutions to customers to stay competitive.

Established by the MOEA and machine tool-makers in 1983, the association helps member companies build partnerships, enhance production technologies and develop promotional campaigns through exchanges and lectures as well as by providing market information.

Goodway Machine’s high-precision equipment is used to manufacture sophisticated components for high-tech sectors. (Photo by Chin Hung-hao)

Hsu is also the chairman of Habor Precise Inc., which produces temperature control devices such as heat exchangers and oil and water coolers for industrial machinery. His products hold an 85 percent market share in Taiwan’s machine tool industry and boast a 90 percent global market share for printed circuit board drilling machines.

“An emphasis on innovation and R&D has helped our company develop high-precision equipment and gain a strong international presence,” the chairman said. “Taiwan manufacturers should move toward high-end market segments to stand out against low-cost competition from mainland China.” His company has collaborated closely with PMC and the Taichung branch of the Metal Industries Research and Development Centre in new product development, he added.

Yeong Chin Machinery Industries Co. (YCM), another major Taichung-based company, produces a wide range of CNC turning centers and other high-performance machining devices. The manufacturer has successfully expanded its business overseas since its inception in 1954, selling products in more than 30 countries and territories.

Habor Precise’s products take up around 90 percent of the global market share for printed circuit board drilling machines. (Photo by Chin Hung-hao)

Elaine Chen (陳依鈴), an assistant manager in YCM’s Business Development Division, said her company’s core competencies comprise a well-rounded manufacturing process that spans casting, machining, final assembly, testing and packaging. All of this is done within its factory complex to ensure better quality control and timely product delivery.

At the same time, YCM cooperates with about 200 local suppliers of components and parts. This brings benefits such as fast delivery and after-sales services as well as reductions in component inventory and R&D investment.

“Being part of a cluster enhances our access to information, knowledge, local resources and technology,” Chen said. “Plus, while striving to accommodate quality requirements from our American and European clients, we hold our suppliers to the same high standards.”

Smart Machinery Choices

In recognition of the machinery industry’s important role in Taiwan’s economy, as well as the need to stay at the forefront of manufacturing trends, the government has listed the smart machinery sector among its major industrial development objectives. It aims to turn Taichung into a smart machinery hub by offering support in such areas as international cooperation, land acquisition, marketing, R&D and talent recruitment.

Demand is increasing for high-precision and high-speed machines with intelligent solutions, according to YCM. For this reason, the company has developed real-time factory monitoring systems and incorporated them into its high-end units.

“We continue to add new features to our products to increase their value and put ourselves ahead of the competition,” said Frank Liu (劉庚朋), director of YCM’s R&D Division. “Our intelligent production management systems—key elements in Industry 4.0—enable effective human-machine communication and collaboration to boost production efficiency.”

Machinery manufacturers in the Taichung cluster produce high-speed, high-precision devices that are utilized by companies around the world. (Photo by Chin Hung-hao)

The fourth industrial revolution, dubbed Industry 4.0, is characterized by digitally connected manufacturing that incorporates technologies such as artificial intelligence, big data, smart automation and the Internet of Things into production processes.

To assist companies such as YCM, the Smart Machinery Promotion Office was set up by the MOEA and Taichung City Government at PMC headquarters in February. The office works to foster strategic partnerships between industry, academia and the government on the introduction of smart manufacturing technologies into production processes and product development. It is staffed by experts from ITRI, PMC and the city government’s Economic Development Bureau.

Kevin Lee (李健勳‬), vice president of PMC, said Taiwan firms have the knowledge, experience and wherewithal to take a leading role in the development of Industry 4.0 technologies. “Over the years, local machinery manufacturers have evolved from producing traditional to state-of-the-art equipment, focusing first on precision, then automation and now artificial intelligence,” he said. Accordingly, the center has tailored its technical assistance projects to meet the industry’s changing needs.

Taiwan’s machinery manufacturers are globally competitive thanks to the quality and reliability of their products, according to Lee. They are particularly adept at accommodating clients that seek smaller orders of custom-made products, he said, adding that such attributes are increasingly in demand, particularly from the aerospace, automobile, information and communication technology as well as medical sectors.

The heavy concentration of machinery firms in and around Taichung has created a dynamic supply chain ecosystem, Lee said. “This, combined with enhanced government support, can facilitate efforts to offer innovative total solutions and maintain the nation’s foothold in international markets.”