Taiwan’s fastener sector is investing in smart manufacturing and R&D to move upmarket and remain competitive in an unpredictable climate.
Although Taiwan is more famous for its stronghold in the global semiconductor industry, it’s also a leading player in the fastener industry, which produces the trillions of screws, nails, and nuts and bolts that keep buildings, industrial equipment, vehicles, and consumer goods together.
The fastener industry in Taiwan began to emerge in the 1950s during the initial shift from an agriculture-based economy to an industry-oriented economy. In the following decade, its growth was driven by the Vietnam War, during which Taiwanese firms were contracted to supply fastener products to the U.S. Army. In the 1970s, the appreciation of the Japanese yen led to a major shift in orders from Japan to Taiwan, further fueling the industry’s expansion.
Today Taiwan is the world’s third-largest fastener exporter, with an export value of around US$6 billion in 2022, accounting for 13% of global production. It is also the largest exporter of fasteners to North America, with annual exports worth US$1.1 billion.
The Taiwan External Trade Development Council (TAITRA) pitches Taiwan to international customers as the “Kingdom of Screws,” noting that the industry has “gained great popularity throughout the world for prompt delivery, excellent quality, and competitive functionality.”
The more than 1,600 manufacturers on the island are located within three industry clusters, with the southern cluster producing about half of total output, while the central and northern areas evenly share the remainder.
Conditions in the Taiwan fastener industry often reflect broader changes taking place in the global economy. This was the case for Kaohsiung-based Chen Nan Iron Wire, a leading manufacturer of wires, screws, bolts, and special fasteners for the construction, furniture, and automotive industries. The company enjoyed solid business growth through mid-2022, when inflation caused by the war in Ukraine and interest rate hikes in various parts of the world began to take effect.
“Our industry depends mostly on the buildings being built in the U.S. and the European markets, but inflation and the rising cost of credit discourages construction,” says Jerry Huang, R&D manager at Ray Fu, Chen Nan Iron Wire’s export sales unit.
In response, Chen Nan sought to diversify its portfolio, achieving certification for the high quality standards required by the aerospace sector. The rapid technological advancement in that industry has brought demand for ever more durable fasteners, creating profitable opportunities for suppliers. China Steel Corp., the main source of steel wire for Chen Nan, has supported the upgrade by providing the manufacturer with higher grades of raw materials.
“While a typical drywall screw goes for a fraction of an NT dollar, a similar screw for the aerospace industry could go for more than NT$50,” Huang says. He attributes the dramatic shift in value to “aerospace fasteners requiring rigorous nondestructive testing, such as X-ray and magnetic-particle inspection until a zero-defect rate is reached.”
Victor Kreng, CEO of Tainan-based manufacturer Jing Fong Industry Co., compares the company’s business in the last two years to riding a rollercoaster. Jing Fong, which specializes in automotive self-locking nuts, has benefited from increasing demand from the automotive industry. Kreng says that although the initial Covid-19 shock in the first half of 2020 caused a near-freeze of orders, the company quickly experienced a V-type rebound and recorded full order books by the third quarter of 2020.
“But as every customer came back and asked for more fasteners, a global container shortage led to astronomically rising freight rates, which took a heavy toll on our profit margins, even though revenue growth was robust,” says Kreng. “Then the first half of 2022 saw an improvement in the shipping situation before the economy suddenly took a turn for the worse, with global car sales dropping due to factors such as the automotive chip shortage, high customer inventories, rising interest rates, and inflation.”
Kreng says Jing Fong has been weathering the storm by shifting toward smart manufacturing. Recent investments in complex 3D metal-forming processes, smart sensors, real-time equipment monitoring, and radio frequency-inventory identification systems have made it easier to reach the ultra-low defect rates required by automotive customers. It also increased flexibility for the quick on-demand production needed for unpredictable times.
Getting ahead with R&D
Whereas major customers typically approach fastener manufacturers with requests for products made according to customer blueprints, smaller customers unfamiliar with the metal industry often need help with design from manufacturers, says Huang of Ray Fu.
For truly industry-pioneering R&D, manufacturers can team up with Taiwan’s government-initiated industrial research powerhouses, such as the Metal Industries Research & Development Centre (MIRDC) in Kaohsiung.
Kaohsiung-based Huang Liang Biomedical Technology, a manufacturer of precision parts mainly used for orthopedic and dental implants, took advantage of this opportunity, working with MIRDC and the National Taiwan University College of Medicine to develop a modular artificial finger joint implant.
Huang Liang CEO Jim Hsueh says the company faced many challenges in acquiring the medical product manufacturing certificates and talent needed to meet customer needs. The company acted as a Contract Development and Manufacturing Organization (CDMO) for the project, covering R&D, reverse engineering, manufacturing, after-process inspection, and delivery arrangements.
MIRDC also partnered with Kaohsiung-based fastener manufacturer Taiwan Shan Yin to develop high-strength integrated stainless steel drilling screws. The technology involves gas activation and accurate AI-driven parameter control to modify the surface hardness of stainless steel to a level much higher than that of ordinary carbon steel.
Taiwan Shan Yin hopes that the R&D project will help it win more international orders, particularly in the EU, where regulations require that exposed fasteners on buildings with a service life of more than 25 years be made of stainless steel.
Another partner is the Hsinchu-based Industrial Technology Research Institute (ITRI), which recently completed a two-year R&D project with Taichung-based fastener-maker Ting-Sin to create a new aluminum composite for lightweight aluminum fasteners used mainly in electric cars. The composite could reduce vehicle body and chassis weight by over 10%, decreasing the vehicle’s energy consumption and lowering carbon emissions.
The expanding electric vehicle market has led to a rapidly increasing demand for aluminum alloy fasteners, according to Lee Tzong-ming, ITRI vice president and general director of the institute’s Material and Chemical Research Laboratories.
“The upstream alloy materials for lightweight aluminum alloy fasteners are mainly controlled by European, American, and Japanese manufacturers,” he says. “Since there had not been professional production of high-strength aluminum alloy fasteners for vehicles in Taiwan, our joint project with Ting-Sin was needed to close a gap in the domestic lightweight fastener industry chain.”
Asked how the remainder of 2023 will work out for the Kingdom of Screws, Ray Fu’s Huang predicts that customers’ inventories will shrink in the second quarter before an expected upturn in orders in the third quarter.
Kaohsiung-based Sheh Fung, a manufacturer of screws mainly used in wooden houses, iron roofs, wood plank roads, and home DIY interior decoration, also expresses optimism, especially for U.S. orders. The company, which is about to enter two major physical channels for home improvement goods, noted in a written response that “although rising gas prices have a certain impact on the decoration of new homes, we are optimistic that the American public will still have robust market demand for home decoration.”
Sheh Fung attributes the expected strong demand to the high average age of houses in the U.S., efforts underway to preserve property value, and the high levels of disposable income in American households. The company also plans to invest in automotive fasteners and develop business in cooperation with battery module equipment manufacturers in light of the increased demand for electric vehicles.