Improved Outlook for Office Furniture Makers

Emma Lee of Kelly International shows off one of the company's adjustable-height desks. Photo: Jens Kastner

The U.S.-China trade war and demand for sit-stand desks are helping drive growth for Taiwanese manufacturers.  

Taiwan’s furniture industry experienced a big boost in the 1990s through orders from IKEA –then suffered as the Swedish giant turned to suppliers in China, Vietnam, and other lower-cost countries. Taiwanese makers of wooden furniture generally responded by moving production to Vietnam, both for the cheaper labor and to be closer to the abundant supply of inexpensive Southeast Asian wood.

For makers of office furniture, it has been quite a different story. Their products – mostly made of metal and plastics – need less labor input and the production process can benefit significantly from automation. According to the Taiwan Furniture Manufacturers’ Association (TFMA), Taiwan’s exports of metal office furniture grew by a strong 36% in 2017 to reach US$108.6 million, whereas outbound shipments of wooden office furniture dropped by a steep 23.8% to come to a mere US$5.3 million.

The main export markets for Taiwan’s office furniture are the United States, Japan, and China, in that order. The United States is all but certain to maintain its top spot, given that office furniture is on the Trump administration’s list of Chinese goods that were made subject to additional 10% tariffs in September. According to the Trump administration’s original plan, a further 25% in tariffs was to become effective January 1, 2019. That increase has now been postponed. But if it is imposed later, it would add a significant US$30 to the typical ex-factory price of about US$120 for an office chair.

“The U.S. market has grown a lot in the past three years amid robust economic growth there, and we are expecting many more U.S. orders, as U.S. President Donald Trump’s new tariffs on Chinese competitors translate into increased sourcing from Taiwan as well as Taiwanese-owned factories in Vietnam,” said TFMA secretary Ariel Su. Interviewed at Orgatec, the leading European fair for office furniture, held in late October in Cologne, Germany, she said that “factories in Vietnam and Taiwan are also getting a tailwind because furniture-making in China is under pressure from rising wages, social insurance contributions, and taxes.”

For the Taiwanese furniture-makers, the move to Vietnam has not been without challenges. For example, the Chinese nationals that these operations typically rely on to fill mid-level positions often quit to establish their own competing factories once have gained enough inside business knowledge.

Another worrying trend is the increasing price of industrial land in Taiwan. As a result, many family-run furniture-making businesses have been considering closing down, selling their land and investing the proceeds in sectors they see as more promising. This phenomenon is likely to become even more pronounced in the medium term. The price of industrial sites is predicted to climb further as some Taiwanese manufacturers, including members of the cash-rich electronics sector, relocate from China due to the U.S.-China trade war.

At this year’s Orgatec, Taiwan was represented by 32 exhibitors, making it the non-EU country with the most booths. The Taiwanese exhibitors noted enviously that while less than 5% of their costs for participating in the trade show were subsidized by the Taiwan External Trade Development Council (TAITRA), competing Chinese exhibitors received subsidies under Chinese trade-promotion programs covering 70-80% of their expenses.

Lawrence Lu, a manager at Chiayi-based office-chair manufacturer Chueng Shine Co., said that a key objective of attending Orgatec was to allow the company’s designers to get more familiar with current trends in European design. A major take-away this year is the European preference for roundness – in contrast to the American emphasis on angularity. Another difference between the two markets is the seat width, with U.S. customers typically demanding a few extra inches.

“Changing designs isn’t difficult, but you must see such things in real life – simply looking at product photos on the web while sitting in your office in Taiwan is no substitute,” Lu said. “The other vital aspect to our overseas competitiveness is the materials we use, and this clearly differentiates us from Chinese and Southeast Asian competitors.” Chueng Shine’s office chairs are made of nylon rather than less durable plastic, as well as steel sourced from the Kaohsiung-based China Steel Corp., which he considers superior to steel made in China.

The level of quality, he says, is evidenced by the performance of Chueng Shine’s chairs in third-party testing by such international service providers as BIFMA, SGS, and TÜV. Because of the use of nylon and Taiwanese steel, Lu says, his chairs can easily pass a “24/7” back-tilt test in which a robotic arm pushes on the back of the chair around 300,000 times.

BIFMA office-chair certification also involves dropping weighted bags onto the chair to test its strength; loading weights on the front edge of the chair to test whether it tips over; seeing whether a person can balance on the chair’s armrest; moving the wheels over obstacles for prolonged periods of time; and exposing the chair to smoldering cigarettes.

Third-party testing is a prerequisite for winning public procurement contracts, which typically are particularly lucrative due to the large quantities involved. Of course, private-sector clients also find it easier to sell chairs that are third-party certified.

Taking a stand against sitting

The busiest Taiwanese booth at Orgatec seemed to be that of Changhua-based Kadeya Enterprise Co., a maker of sit-stand furniture for offices and classrooms. All the exhibited pieces, such as lecture and pupils’ desks, are easily height-adjustable, enabling the user to either sit or stand.

The booth was managed by Kadeya General Manager Jesse Liau, formerly IKEA’s legal representative in Taiwan. “People all over the world are now thinking that constant sitting is unhealthy, and this translates into rapidly increasing demand for sit-stand solutions,” Liau said. “Even some public schools in the U.S., UK, and Germany are already using sit-stand desks.”

Kadeya continues to manufacture entirely in Taiwan, since it is difficult to source high-quality steel, castings, coatings, and electric components in Vietnam, Liau says.

Another exhibitor, Taipei-based Kelly International Corp., specializes in sit-stand desks that it calls workstations. Kelly’s operations in China have been complicated in recent years by rising labor costs and stricter labor regulations, as well as the need for an increasing number of environmental certifications in line with China’s anti-pollution drive.

In addition, a Chinese regulation now stipulates that the load value of each export container may not exceed US$60,000, a rule presumably aimed at countering tax evasion. “Taiwan does not have such a value ceiling for export containers, which means that it is better for us to produce high-value items in our Taiwan factory, as opposed to our China factory,” explained Emma Lee, Kelly’s sales manager. The U.S.-China trade war is also causing the company to consider shifting more orders from the China factory to Taiwan, she said.

“On the other hand, finding workers in Taiwan is not easy, and the rigid overtime regulations introduced last year are also a problem,” she added.

Seat-Well Enterprises Co., another company focusing on sit-stand solutions, has also recently decided to shift most of its production from Guangdong to its Taichung plant in order to satisfy customers’ request for shipping from Taiwan to avoid the higher U.S. tariffs.

Seat-well develops its products in cooperation with Scandinavian partners. It manufactures the plastic parts and foam for the seats itself, while sourcing other components, such as height-adjustment mechanisms and wheels, from outside suppliers. Thus moving production across the Taiwan Strait mainly entails transferring the molds into which the plastic is injected.

“One major challenge in relocating to Taiwan is the shortage and high price of land,” said Amy Hsu, Seat-well’s general manager. “The other major drawback is that there are far fewer suppliers in Taiwan to choose from compared to China.”

Owen Yang, general manager of Changhua-based Shopin Lock Co., whose padlocks and spare key boxes are made 100% in Taiwan, says the U.S.-China trade war has already given the company’s business a shot in the arm. In fact, Shopin has had to turn down several orders in recent weeks for lack of additional production capacity, he said.

“We expect the period of high U.S. demand to last either two or six years, depending on whether Donald Trump will win a second term in 2020,” Yang said.

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