Big and light
Tera Autotech, which built its business on automation, has also targeted supporting aspects of the production process--materials handling and storage equipment.
Materials handling equipment is involved in moving items between the 20-some production processes, everything from production of the glass substrate to rubbing, printing, cell assembly, and crystal injection.
"We've built conveyer belts up to a kilometer in length that meet Class 10 cleanroom standards," says Tera Autotech's Leon Lee. Class 10 standards represent an incredibly uncontaminated environment, with no more than ten particles of 0.5 micron or greater diameter per cubic meter of air. Lee explains that the design of and materials used in the conveyor belts are very important because the motion of the belt systems themselves can stir up dust.
"Storage equipment," meanwhile, refers to temporary storage facilities for LCDs at intermediate stages of production. Tera Autotech has developed storage systems for factories producing the larger eighth-generation glass substrates. These enormous 15-meter-tall, 1,000-square-meter units are filled with cassette holders housing the substrates, but weigh less than 20 metric tons--about 26% less than Japanese-made storage systems. Li Yi-lung says that airflow is the key to storage systems because you have to keep out dust particles. He explains that the technology isn't difficult--you can use computer analysis to test the quality--but local panel manufacturers have placed few orders because they worry that buying from a newcomer might be risky.
"Local manufacturers don't yet trust local products," says Li, putting his finger on the frustrations and challenges local high-tech production equipment suppliers face.
A bright future in parts
The flat-panel-equipment business has some notable downsides: While companies may spend three years filling a single order, they may also go three years without a single order. Companies must also custom build each order they receive. It's a different matter entirely with the precision machine tools used to manufacture machine parts. Such machine tools can be produced in volume and product lines enjoy long life cycles. The government is therefore promoting this sector of the precision machinery industry most heavily.
Precision machine-tool manufacturing is the machinery industry's leading sector, and one of the few sectors in any Taiwanese industry to successfully market its own branded products internationally. In fact, the local sector ranked sixth in the world in terms of production value (NT$126 billion) and fourth in terms of exports in 2006.
Taiwanese machine-tool makers originally used a moderate pricing strategy to gain a footing in the international market. Their tools were less reliable, precise and efficient than those of the leading German and Japanese brands, and local toolmakers also had to import key parts.
Under its Technology Development Program, the Ministry of Economic Affairs a decade ago began asking the Industrial Technology Research Institute (ITRI), the PMC, and other institutions to work on development of critical components and single machines. In recent years, they have begun technology transfers to industry. Cooperation with industry has also led to the development of high-speed, high-precision linear-motor machine tools and key components, such as high-speed spindles.
Combined machine tools constitute another high-value-added trend. These devices combine the lathing, milling and boring processes used in the manufacture of components into a single machine.
Chen Chun, a project manager in the MOEA's precision machinery development group, says that the transfer of unfinished parts or goods between different machines leads to downtime, as well as time spent loading and unloading materials. Collectively, this accounts for 40-60% of the production cycle. Combined machine tools, known as machining centers, can lower manpower and time requirements, and utilize less floorspace than multiple single-function machines. This enables them to greatly enhance efficiency, a crucial factor in this era of low profit margins. Taiwan, which is a leader in the development of the integrated software crucial to the functioning of machining centers, certainly benefits from their growing use.
Localization, internationalization
The gains in Taiwan's production of key components are crucial for the development of its precision machine tools industry.
Wang Wuu-shyong says that the key machine-tool components currently produced in Taiwan include bearings, spindles, linear guides, and ballscrews. These have already entered the Japanese and German supply chains, and sales have been growing at an average of 28% per annum for the last three years. But the production of the advanced servomotors and control devices that comprise a machine tool's brains await breakthroughs that will allow Taiwanese firms to escape foreign firms' stranglehold on the technology. Local firms also need to grow large enough to achieve the economies of scale that will allow them to price their products more competitively.
Taiwanese component makers tend to be small, and their growth is typically dependent upon the machine-tool makers they supply. The government is therefore urging them to partner up with large machine-tool manufacturers in the US and Europe. Such an approach would eliminate the risk of having of all their eggs in the Chinese basket, improve their R&D, and make them more competitive in international markets.
Take Hiwin, which built its business manufacturing ballscrews and linear guides, for example. When the company bought the 40-year-old German ballscrew maker Holzer in 1993, it gave itself a technological leg up, pulling itself much closer to the Japanese. In so doing, it broke free of its role supporting machine-tool plants and established itself as an independent business. The company has continued to advance its technology with the result that its parts are now employed in high-precision medical equipment and semiconductor manufacturing equipment.
The public-private-sector cooperation of recent years increased the production value of Taiwan's precision machinery industry to NT$800 billion in 2006. Machines for traditional manufacturers, including woodworking and textiles, accounted for about 50% of this amount; machine tools and parts each accounted for another 16%; semiconductor and LCD panel manufacturing equipment combined for 7% of the total; and the robotics sector accounted for the remaining 3%.
Ten NT$10 billion enterprises
High-tech and services are expected to be at the forefront of Taiwanese industry in the years ahead, and precision machinery is the foundation upon which the high-tech industry is built. Precision machinery is trending towards high-value-added high-speed, high-precision, and combined-function devices that are enabling the rapid upgrade of other industries. This, in turn, is benefiting optoelectronics, semiconductor, automobile, and consumer electronics producers.
"You need good tools to do good work. The only way we're going to meet Taiwanese industries' need to upgrade themselves further is by producing ever-better precision machine tools," says PMC president Chan Ping-chih. He cites the Taiwanese automotive industry's lack of a highly efficient engine as a case in point: it takes very precise integrated machine tools (e.g. horizontal machining centers) to produce fuel-efficient, low-emission engines.
"Taiwan's greatest advantage is its manpower," says Chan, who attributes the recent phenomenal growth of the island's machinery industry to the quality of its workforce. When Japan and Korea import Western technology, their engineers often have trouble with linguistic and cultural differences. Chan claims Taiwan's workers are the hardest working and best educated in Asia. He also argues that the island's machinery industry benefits from the unique way in which its businesses are clustered, something other newly industrialized countries will have difficulty replicating within the next five to ten years.
However, given the trend towards global competition, Taiwan's industry is facing a serious challenge. Currently, the output of the majority of Taiwan's 200-300 machine tools firms is less than NT$1 billion per annum. They don't have the resources to establish overseas offices and must leave their post-sales customer service to agents. This, in turn, makes it difficult for them to provide good maintenance service. The government is therefore encouraging them to grow larger and extend their customer service abroad. To that end, it is nurturing ten large firms, including Yeong Chin Machinery, Tongtai Machine and Tool, and Victor Taichung Machinery Works, with the objective of growing their revenues to the NT$10 billion level.
Another key is attracting top research personnel. Chan admits that while the Taiwanese machinery industry has been adept at copying others, it hasn't yet become adept at developing its own breakthroughs. Even though the industry is far cleaner than it once was and its production involves none of the metal shavings and ear-piercing noise of the old days, tech workers still prefer the stock bonuses of the semiconductor and electronics firms. If the industry is to advance further into optoelectronics, biotechnology, energy and environmental devices, and micro- and nano-applications, it must attract more top-tier multidisciplinary talent.
Based on the industry's current trajectory, the PMC expects it to hit the NT$1 trillion target ahead of schedule in 2009. Though this is clearly good news, difficult challenges are equally obviously before us. As a nation, we hope to see our precision machinery industry nurture its strengths and move to the next level, taking its place with our high-tech industry on the global stage.