Fastener Industry Upgrades to Retain Leading Position

Taiwan, long among the top exporting countries, is developing its capability for higher-value products for the auto and aerospace sectors.

Nuts, bolts, screws….They may just be small pieces of metal, but collectively they add up to big business for Taiwan manufacturers. Last year companies on the island exported more than US$4 billion worth of fasteners, for growth of 10% over 2013. That makes Taiwan the world’s third-largest supplier to the international market after Germany and China in terms of value – for a global market share of 10.9%. In terms of volume, Taiwan is in second place, following China.

The Gangshan district of Kaohsiung is the production bastion, home to over 70% of the industry’s total output, and also the site of the Taiwan Fastener Museum. Much of the remaining production is also in southern Taiwan, in the Tainan area.

With government assistance, the domestic fastener industry has been striving to transform and upgrade its operations in the face of growing competition from foreign rivals, in order to hold onto its status as one of the world’s leading sources of production. A major achievement in that direction has been inroads over the past decade into one of the higher-value segments of the fastener market – supplies to the automotive industry. Meeting the higher standards for the strength and durability of these products requires not only higher grades of materials but also more advanced metallurgy and production techniques.

One of the leading Taiwan manufacturers, Tainan-based San Shing Fastech Corp. – it proclaims itself to be the largest manufacturer of steel nuts worldwide – is now turning out some 6,000 metric tons of fasteners a month, 80-90% of which are automotive fasteners, shipped to OEM suppliers of components to major automakers worldwide.

The move into automotive fasteners has greatly boosted the company’s profits, since the gross margin for such products exceeds 20%, compared with less than 15% for common fasteners, according to a company spokesperson. The bulk of the remainder of San Shing Fastech’s business is derived from sales of fastener-manufacturing machinery and molds.

Unlike many of its peers in the domestic industry who have set up factories in China, the company’s production is carried out entirely in Taiwan in order to maintain the quality of its products, which are used mainly in automotive production in the United States and Europe. Thanks to the higher margin, plus an upturn in business volume, the company registered earnings per share (EPS) of NT$1.09 in the first quarter this year and expects to reach NT$4.34 for the whole of 2015.

Another leader in the industry and also located in Tainan is Boltun Corp., which has transformed itself into a dedicated automotive-fastener manufacturer. Its customers include a number of OEM component suppliers to major automakers, particularly China-based joint ventures by Volkswagen, General Motors, and Nissan, as well as such auto-parts makers as TRW, Benteler, and Dana. To serve the Chinese automotive market, now the world’s largest, the company has set up factories in Xiamen and Suzhou equipped with integrated production lines. Boltun’s revenue in 2014 came to NT$14 billion (US$437.5 million).

Currently the company is investing NT$2 billion (US$62.5 million) to build a new production complex and headquarters in the Guiren district of Tainan. Scheduled for completion in 2017, it will include facilities to cover design, manufacturing, surface treatment, automatic sorting and testing, and packaging. For its future business expansion, the company has developed fasteners for the aerospace industry and for wind turbines, and is in the process of applying to Nadcap, the certification body for the global aerospace industry, for certification of its aerospace fasteners.

A third major industry player, Taiwan Shan Yin International, has successfully entered the automotive-fastener supply chain for Subaru, Nissan, and Volkswagen. The company boasts a patented nanometer-level coating technology, which enables it to offer a 50-year anti-corrosion warranty for its products. It also turns out small screws for use in computer, communication, and consumer electronics products.

The Taiwan International Fastener Show, held in Kaohsiung, is the world's third largest exhibition for the fastener industry.
The Taiwan International Fastener Show, held in Kaohsiung, is the world’s third largest exhibition for the fastener industry.

In fact, development of products with higher added-value has been a common practice among all major Taiwanese fastener firms. Another example is the Chun Yu Group’s landing of orders for rail-use fasteners from the light rail systems of Macao and Kaohsiung, Taipei MRT, Taiwan High Speed Rail, and subway systems in China, after it gained International Railway Industry Standard (IRIS) certification of its products in that line in April 2014 – the first Taiwanese fastener company to do so.

The company’s extensive product lineup also includes such high value-added fasteners as those used in bicycles, furniture, high-rise buildings, bridges, and other steel structures. The company’s fasteners were used in the construction of Taipei 101 and many high-rise buildings in China. “Construction-use fasteners now account for 20% of our sales, and meanwhile we’ve sold NT$120 million worth of rail fasteners this year,” reports Chen Chun-liang, the Chun Yu vice president. With factories in Taiwan, China, and Indonesia, the company’s sales rose 9.28% last year to reach NT$9.18 billion (US$287 million).

Some of the other top performers in the industry include:

  • The Tong Group, whose factories turn out stainless-steel fasteners for use in construction, machinery, transportation equipment, communications equipment, and ships, while production in Taiwan focuses on stainless-steel fasteners for autos, aircraft, and solar-energy devices. The company recorded sales of NT$6.4 billion (US$200 million) in 2014, with after-tax net profit of NT$513 million (US$16 million) for EPS of NT$3.05, almost double 2013’s NT$1.56.
  • Sheh Kai Precision, which makes bi-metal fasteners (carbon steel in the front and stainless steel behind) with spiral threads. The carbon steel enables the screws to penetrate hard objects, such as cement, while the stainless steel is included for the sake of its anti-corrosion properties. The bi-metal fasteners enjoy a gross margin of over 30%, compared with 8-10% for common fasteners. Sheh Kai ships the products mainly to the United States and Australia for use in construction and other purposes.
  • Intai Technology has made the transition from a manufacturer of industrial precision fasteners to a supplier of components and parts for medical devices, such as endoscopic-surgery and mini-invasive devices. In 2014, it had sales of NT$1.8 billion (US$56 million) with an EPS of NT$7.87. In recognition of its success, the Ministry of Economic Affairs (MOEA) earlier this year included the company among the 12 enterprises to receive the 2015 Mittelstand (meaning Medium-sized Enterprise) Award. The award is given to companies deemed to be “hidden champions” by virtue of their unique, internationally competitive products or services.

Government Support

In support of the fastener industry’s efforts to upgrade their technology and operations, the MOEA’s Industrial Development Bureau (IDB) has included fasteners on the priority list of traditional industries being assisted in the development of higher-value-added products. The pressure to upgrade has recently intensified owing to this year’s sluggish market demand. Exports slipped 0.46% year-on-year in the first nine months of 2015 to amount to US$3.15 billion.

Besides offering technical support, the IDB has also been assisting the fastener manufacturers in the area of Internet applications, both for marketing purposes and to help them diversify their operations into the realm of service. With IDB assistance, for instance, Taiwan Shan Yin has created a database incorporating its process technologies and expertise in the surface treatment of bolts and nuts, with access to the data available to other companies for a fee.

Another aspect of MOEA’s support has been to arrange for the China Steel Corp., the upstream material supplier, to team up with a number of leading fastener firms, including Chun Yu and San Shing Fastech, in launching the “Taiwan Fastener Service Cloud” in early 2015. With 150 local member companies to date, the website functions as a matchmaker between foreign buyers and local suppliers, as well as a supply-chain manager and technology and knowledge database. Fastener manufacturers, for example, can place orders for steel materials with China Steel via the network. China Steel predicts that the system will enable the industry to boost the average export price, which stood at US$2.67 per kilogram in 2014, by 1% in three years and the industry’s output value by 6% in five years.

“The goal of China Steel in pushing the Fastener Service Cloud is to facilitate the production and management of fastener firms, enhance their technology, and boost their products’ added value,” says Liu Chi-kang, vice president of China Steel. The effort is in line with China Steel’s role as the pillar of the local fastener industry by providing good quality wire rods at reasonable prices, as well as the more advanced materials needed by makers in turning out higher-value-added products.

The steel company also provides an annual fund of NT$5 million to $10 million to an engineering research center at the National Kaohsiung University of Applied Sciences for R&D in fastener technology.

A few major fastener producers, such as Chun Yu, operate their own wire rod plants, giving them an extra edge in production cost. In the second half of 2014, the Tycoons Group Enterprise Co. began operations at its US$83 million electric-furnace steel mill in Thailand. The integrated production system encompasses billets, wire rods, and fasteners, including higher-value-added automotive and construction-use fasteners.

Some Taiwanese fastener firms have benefited from developing their own cutting-edge production equipment. Founded in 1965, San Shing Fastech made its name in the industry three years later when it unveiled an innovative “high-speed nut-forming machine” of its own invention. Since then, heavy investment in R&D has enabled it to steadily roll out more advanced models that have generated dozens of technology patents.

Other Taiwanese companies have also specialized in the equipment portion of the market. Charng Guey Machinery turns out high-speed tapping machines that have production efficiency double that of conventional models, and Ching Chan Optical Technology focuses on screw- and bolt-sorting machines, with sales this year expected to reach NT$500 million (US$15.6 million), 43% higher than the 2014 level. The machines, supplied to major fastener manufacturers in Taiwan and more than 30 other countries, can sort out defective fasteners during the manufacturing process, detecting tiny cracks beyond the capability of the naked eye.

The brainchild of the company’s strong R&D team, which makes up one-third of the company’s total workforce, the sorting machines brought Ching Chan a special award for innovation and research from MOEA. To meet the strong demand, the company has expanded by building a new factory in Kaohsiung (which is also making nut formers) and acquiring a domestic sorting-machine operation.

“Although regarded as a traditional line, Taiwan’s fastener industry has kept on growing in terms of both output value and average unit price over the past 10 years,” observes Chang Hsueh-ping, dean of the College of Mechatronic Engineering at Kao Yuan University. “It has made much progress in rolling out products with higher added-value, such as automotive fasteners, construction fasteners, and even aerospace fasteners. Many of the 2,000-some local fastener manufacturers are family enterprises, and they have shown remarkable resilience in operation.”

To highlight the competitiveness of the Taiwanese fastener industry, MOEA’s Bureau of Foreign Trade will organize the fourth Taiwan International Fastener Show, to be held in the Kaohsiung Exhibition Center, April 11-13 next year. Four hundred companies are expected to display various fasteners, fastener production equipment, fastener tools, and sorting and testing equipment in some 1,000 booths. The event will be jointly organized by the Taiwan External Trade Development Council (TAITRA) and the Taiwan Industrial Fasteners Institute.

Liu Tien-min, executive secretary of the Institute, reports that the exhibition space at the fair – the third largest international fastener show worldwide, behind only Germany’s Fastener Fair Stuttgart and Fastener Expo Shanghai – has already been fully booked.

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