Assess the Taiwanese machine tool market
According to the seven indicators of Taiwan's machine tool business dynamics, it can be further classified into the overall economy, export dynamics, and domestic production activities, indicating the current status of Taiwan's machine tool industry:
The US-China trade dispute has brought uncertainty to Taiwan’s two major exporters of machine tools
In the past ten years, China has become an important engine driving global economic growth, ranging from daily consumer goods to machinery production equipment demand. It is also the most important export region of Taiwan's machine tool industry, accounting for more than 30% of the overall machine tool exports. After the trade war between China and the United States was in full swing last year, it brought huge uncertainty to the Chinese economy and consumers, and internal problems such as the spread of African swine fever also increased China's inflation and contracted domestic consumption. According to the National Bureau of Statistics of China, the annual GDP growth rate in the third quarter of 2019 was 6.0%, a decrease of 0.2 percentage points from the second quarter, which was the lowest level since 1992. Due to continuous trade disputes and weak domestic demand, the PMI index, which represents China's manufacturing boom, has fallen below the 49.6 level in 2019. At the same time, organizations such as the International Monetary Fund (IMF) have continued to lower China's economic growth forecasts.
Secondly, the United States is Taiwan's second-largest exporter of machine tools, accounting for more than 12% of the total export of machine tools. The performance of the U.S. economy in 2019 remains robust, with GDP growth rate maintained at more than 3%. According to the U.S. Bureau of Labor Statistics released in September 2019, the U.S. unemployment rate was 3.5%, which is a 50-year low. In terms of inflation, the US Consumer Price Index (CPI) increased by 1.7% in September 2019, and the impact of the increase in import tariffs has not been felt. The Fed cut interest rates by one yard in September, and the federal funds rate reached 1.75-2.0%, maintaining a loose monetary environment. In terms of economic activity in the US manufacturing industry, the average PMI index in 2019 was 51.9, which was 7.5 points lower than the average index in the same period in 2018, which means that the US economy has shifted from warming to a slowdown.
Economic growth in Europe continues to be weak, demand slows, and inflation is below the preset target. The European Central Bank (ECB) will continue to adopt monetary easing measures. The service industry and consumer confidence indicators of the EU and the Eurozone have both declined, and both are at relatively low points recently. The average PMI of the Eurozone manufacturing industry in 2019 is about 47.6, which means that the European economy continues to slow down.
Taiwan’s machine tool exports were affected by the downturn, but the decline in export orders for machine tools has slowed. Taiwan’s machine tool exports are mainly for export. The changes in domestic machine tool exports can be regarded as a key indicator of Taiwan's machine tool industry. China is our largest exporter of machine tools. Compared with consumer countries, China's orders for Taiwan's machinery can be regarded as a leading indicator to observe the turning point of Taiwan's machine tool business. After 2015-2016, the decline in energy and raw material prices caused demand in emerging markets to cool, as well as the recession in the European and American markets, Taiwan's machine tool exports have experienced a double-digit decline for two consecutive years. Fortunately, the situation improved from 2017 to 2018, leading the recovery in advanced countries such as the United States and Europe, the application of emerging technologies has expanded, and the Chinese consumer market has also resumed activity. The demand for upstream processing equipment has led to steady double-digit growth in Taiwan machine tool exports for two consecutive years. However, under the influence of the US-China trade dispute, the export momentum of machine tools began to weaken in the second half of 2018, and the monthly export growth rate of 2019 has been reduced by 1 to 20%.
If we observe the changes in China's machinery orders, we have generally maintained double-digit growth every month from 2017 to 2018. However, due to the impact of the US-China trade dispute in the second half of 2018, China's internal consumption and investment turned conservative, and the number of machinery orders for China It also declined significantly. The annual growth rate of orders for the whole year of 2019 declined by nearly 30%, and the decline did not converge until October. Since machinery orders reflect the general situation of machine tool business in the next 3-6 months, the decline of machinery orders has gradually bottomed out, which means that the Taiwan machine tool industry will have the opportunity to welcome the booming boom in 2020.
Domestic production activities
The sales of machine tool bulk products and the revenue performance of the industry have been impacted, but the decline has gradually converged. Taiwan machine tool sales bulk products are integrated processing machines (accounting for 30% of overall sales), numerical control lathes (accounting for 18%), and other numerical control tools Machines (including NC drilling, milling, boring, grinding, punching, etc., accounting for 12%), and metal forming machines (accounting for 10%), etc. In the first October of 2019, the overall sales value of machine tools decreased by 17.3% compared with the same period of last year. Among them, the products with a large decrease were milling machines (-32.2%), electrical discharge machines (-31.0%), drilling machines (-29.1%), presses, Comprehensive processing machines, other cutting machine tools, etc. (reduced by more than 23% each) show that the market conditions in 2019 are deserted, of which only hydraulic presses have increased by more than 13%. Secondly, since Taiwan's medium and high-end machine tools are mainly sold in the European and American markets, the medium and low-end machine tools are mainly sold in mainland China and emerging market countries. Under the influence of the simultaneous depression of European beauty and the demand in mainland China, the first 11 months of 2019 The total monthly revenue of large machine tool manufacturers decreased by nearly 20% compared with the same period in 2018. However, observing the October-November revenue profile, the revenue decline of some businesses has gradually slowed down, showing that the momentum of revenue has bottomed out with the easing of the US-China trade situation and the deepening of the decline. Looking forward to 2020 Taiwan's machine tool industry is waiting for an opportunity. The US-China trade dispute is easing, and global economic activity is expected to outperform 2019.
In the 13th round of negotiations between the United States and China in October 2019, the two sides reached a consensus to sign the first phase agreement. The general conditions are: China buys American agricultural products, and the United States no longer imposes tariffs; as to whether The additional tariffs are still unknown. With the uncertainty of trade negotiations hitting investment and corporate confidence, the recent major countries’ manufacturing purchasing managers’ indexes have fallen below the prosperity and decline lines, which means that the downward pressure on the global economy has increased. Weak global economic demand and lower raw material prices have caused manufacturers to postpone orders. Fortunately, in December, the United States and China further agreed to extend the original 15% tariff on the 15th indefinitely, and the original tariff imposed in September was also reduced to 7.5%. The world is optimistic about the positive development of U.S.-China trade, which will restore the long-repressed global manufacturing and consumption activities to the original level. But the biggest risk to China and the global economy in the future is still unable to rationally predict Trump's repeated changes. If Trump believes that China buys agricultural products and makes concessions on intellectual property rights and forced technology transfer, the agreement is expected to last for a while. Another risk comes from Beijing. After the United States and China reached the first phase of the agreement, it was reported that Beijing hopes to withdraw the tariffs that have been imposed. This situation is somewhat similar to that in May 2018, when Beijing's high-level officials revised the agreement reached between the two countries, which increased the trade war. The most worrying issues and risks in the future of China's economy are probably not just the trade war issue, but the risks and issues brought about by the interlocking internal politics and economy. According to the Global Economic Outlook report released by the International Trade Fund (IMF), the IMF has once again revised down the global economic figures for this year. The growth rate of 3% is the lowest year after the financial tsunami. The IMF warned that 90% of the global economy is now The slowdown is the so-called "Global Slowdown." However, as tensions between the United States and China gradually ease, global economic activity this year is expected to be better than last year.
Observing the data of Taiwan's machine tool industry exports to major manufacturing countries in Southeast Asia in recent years, it can be found that due to the destruction of existing supply chains and the rise of new supply chains caused by the US-China trade war, machine tool manufacturers are actively expanding into markets such as Southeast Asia and India. Taiwan is the fourth-largest source of imports for Vietnam's machine tools, after South Korea, China, and Japan. In 2018, the export to Vietnam was US$122 million, an annual increase of 14%. In the first May of 2019, it increased by 54% compared with the same period last year. That shows that Vietnam's demand for Taiwanese machine tools has increased its business opportunities are promising. Thailand is the Asian automobile manufacturing center, and Japanese companies have a complete metal processing supply chain in Thailand. It is the world's top 15 machine tool market and the ninth-largest market for Taiwan. The market is twice that of Indonesia. Business opportunities are still expected.
In terms of European countries, according to the statistics released by the European Machine Tool Association, the top three major European machine tool manufacturers in the index of machine tool orders from 2013 to the first quarter of 2019 are The Czech Republic (-27%), Germany (-20%) and Spain (-16%), only the United Kingdom’s order index increased. The reason is that machine tool consumer countries expect that if the United Kingdom Brexit may increase tariff costs, they are rushing to take off Orders were placed before Europe to take delivery, so only the UK machine tool order index showed a trend of 15% growth. Due to the recession in the manufacturing industry in mainland China and the Euro region caused by the slowdown in the global economy, coupled with the Brexit issue and the debt risks of some countries, the outlook on the demand for machine tools in European countries in the short term is not optimistic, and it is still can't predict when it will resume growth.
In the domestic sector, Taiwan’s economic growth rate in 2019 is initially estimated at 2.64%, showing a situation of cold outside and inside temperature. External demand is mainly affected by the US-China trade turmoil, and international raw material prices have risen and fallen, and demand for most export commodities is still weak. Only communication products and electronic components benefited from the impact of capacity return and peak season shipments, and exports performed better. The domestic demand part is mainly due to the increase in the purchase of physical equipment from domestic semiconductor manufacturers and Taiwanese businessmen who returned to Taiwan to invest. Also, the sales of new car models and electric locomotives continued to be hot, weighted by the wealth effect of the rising stock market, increased number of visitors to Taiwan, and department store promotions. Promote buying momentum, etc., to promote the performance of private and government consumption. Looking forward to 2020, although the dynamics of international trade disputes continue to interfere with the inventory situation of the conductor industry has improved, and investment manufacturers in Taiwan have gradually increased their production capacity in Taiwan to offset some of the negative impacts of exports, and the booming development of emerging applications such as 5G mobile communications, artificial intelligence, and the Internet of Things, making the domestic economy in 2020 expected to be the same as last year Flat. Based on the forecast results of domestic research institutes for 2020, Taiwan's overall economic growth rate will range from 2.5% to 2.8%. According to data from the Ministry of Economic Affairs, as of December 19, 2019, the cumulative total investment of Taiwanese businessmen welcome back to Taiwan's investment program reached 711.6 billion yuan. Taiwanese businessmen are gradually returning. It will take about 3 to 10 years from the promised investment to the actual fund placement. The purchase of machine tools is expected to start this year.
The International Institute of Obstetrics, Industrial Technology Research Institute estimates that the output value of machine tools in 2020 will fall by 3.5 ~ 4.6%, about 149 billion yuan.
The US-China trade dispute has caused drastic changes in the global industrial supply chain, and manufacturing investment is still slowing down. The machine tool industry continues to be affected by the saturation of the global terminal application market and the US-China trade war. Among them, the growth of China's machine tool consumption has slowed, the return of the US manufacturing industry has driven machine tool growth less than expected, and other emerging markets in Asia such as Malaysia, Thailand, and Indonesia. Although the import value has grown, it cannot make up for the kinetic energy that other countries have reduced. The above factors will affect Taiwan's overall machine tool output value in 2020. According to the national economic research institute (NBER) business cycle identification rules, since 1991, a total of 8 cycles of the Taiwan machine tool industry from bottom to peak can be identified. The second quarter of 2016 is the 8th cycle of the Taiwan machine tool industry. The starting point of the trough lasted until the peak of the boom in the second quarter of 2018. It is judged that the current Taiwan machine tool industry is in the boom stage.
Looking ahead to 2020, major international forecasting agencies believe that the economic outlook of key global countries this year will be the same as that of 2019. Mainland China is Taiwan’s largest export market for machine tools, and orders for Taiwan’s machinery and equipment from Mainland China are rotating in the valley. Although there is a trend of bottoming out, However, it will still affect Taiwan's machine tool exports in the first half of the year, and other relevant leading indicators show that a significant economic recovery will be seen in the second half of the year. The International Institute of Obstetrics and Research of the Industrial Technology Research Institute predicts that the decline in the output value of Taiwan's machine tool industry in 2020 will gradually converge, but the overall output value will still fall by 3.5 to 4.6%, about 149 billion yuan. Based on the economic rules, the annual growth rate of Taiwan's machine tool industry output value will drop to the bottom in the second quarter of 2020, remain flat in the third quarter, and show a significant recovery in the fourth quarter.
Grasp key issues and usher in new business opportunities.
Looking forward to 2020, in the face of the slowdown in global economic growth and the weakening of investment confidence brought about by the US-China trade, the market opportunities and integrated technology upgrade development trends of Taiwan's machine tool industry are described as follows:
The demand for Southeast Asian machine tools derived from the transition of China's supply chain has been affected by the trade dispute between the United States and China. The number of Chinese exports to the United States has plummeted. This huge demand gap has made Southeast Asia the region that has benefited the most. A new wave of equipment demand business opportunities Is actively brewing and expects Taiwan in the future
Orders for machine tool products exported to the Chinese market will be partially diverted to the metal processing and manufacturing industries in Thailand, Vietnam, and India. Therefore, the proportion of Taiwan machine tool exports to emerging markets such as Southeast Asia or South Asia will increase.
In the first quarter of 2019, the U.S. imports from Vietnam exceeded a growth rate of 40%, and Chinese investment in Vietnam also increased accordingly. Vietnam is Taiwan's seventh-largest export market for machine tools, with relatively cheap labor costs and a large hinterland. In 2018, the export growth rate reached 14%. According to statistics from the Ministry of Planning and Investment, Vietnam’s foreign direct investment (FDI) in the first quarter of this year was the highest in the same period in the past three years, reaching 10.8 billion U.S. dollars, of which manufacturing investment was the largest, accounting for 77.7%. When the manufacturing base is in Vietnam, the procurement demand for machinery and equipment is bound to increase. Secondly, Thailand is the earliest country in Southeast Asia to develop manufacturing. Some industries closely related to China have been affected by the US-China trade war far more severely than benefited. But for the most important application industry of machine tools, Thailand’s huge automobile industry The industrial chain and the new demands (including the establishment of new factories and expansion of production capacity) arising from the future trade war are relatively potential markets.
According to the assessment of Standard Chartered Bank of Thailand, Thailand’s GDP will grow by 3.5% in 2019. It is expected that Japan will continue to increase investment in automobiles, electronics, and related consumer industries, positioning Thailand as a commodity distribution center, and then Exporting to other countries in Southeast Asia is the most convenient route. Therefore, the GDP growth rate in 2020 is 6%. Although relatively low labor wages and land costs have always been the incentives for Southeast Asia to replace China, the economies of Southeast Asia and China are very different, and there are political risks in Southeast Asia, such as Thailand’s repeated military coups and the reduction in investment income due to currency devaluation. Waiting for exchange rate risks, how to evaluate the potential of the layout market is a problem facing the global manufacturing industry. Currently Southeast Asia or other emerging manufacturing countries.
Everyone wants to get rid of the low-cost manpower-based manufacturing model. Even the developed countries are developing towards the goal of improving the manufacturing industry, establishing high value and high competitiveness. For Taiwan, which has been under attack by Germany, Japan, and China for a long time For the machine tool industry, replacing product sales with manufacturing services is the way to go in the future.
Taiwan's machine tool industry is relatively fragmented in the domestic application industry, and it is impossible to use large machine tool application companies in countries such as Japan and South Korea to seize the market before the economy of emerging markets is fully expanded. Taiwan's machine tool manufacturers are mainly small and medium-sized enterprises, so it is more suitable to adopt the strategy of waiting for the market of emerging countries to become more mature and stable before entering. This approach can prevent the political and economic stability of emerging countries from becoming unstable, and secondly, they are less likely to survive. Problems with sales and sales, that is, to expand market share by providing products with technical or price competitiveness, while maintaining considerable flexibility in response to changes in the supply chain.
Integrated technology upgrade:
Flexible automated production solutions that provide a small number of diverse needs in the market are facing the problem of declining birthrate and aging. It is inevitable for the introduction of automation technology to replace the declining number of workers. Therefore, to cope with the future reduction in the number of jobs, a small number of diverse manufacturing types, and to improve the production efficiency of the manufacturing industry, integrate multiple models and automation facilities to provide flexible automated production, develop automated system integration, and machine networking, etc., for the next Taiwan The development focus of machine tools. To enhance the added value of products and meet the needs of customers, as well as to cope with a small number of diverse manufacturing trends, many machine tool manufacturers around the world are actively developing machine tool products with a single machine and simultaneously implementing a variety of different processing methods. Metal parts are processed by the shaft method. In this way, in addition to reducing the time for loading and unloading and production line replacement, it is also possible to use each axis to cooperate with the spindle for cutting, so that the processed parts can complete all the processes in one processing process to improve the level of product processing accuracy. In the European Machine Tool Show (EMO 2019), many machine tool manufacturers have developed a single machine that can perform many different types of machining operations, thereby reducing replacement time and improving machining accuracy. Multi-tasking -Type machine tools, to meet the market demand for small and diverse product manufacturing, flexible automated production. Therefore, if Taiwanese manufacturers of automation equipment, industrial robots, and machine tools can work closely together in the future to provide high-value-added "manufacturing services" capabilities, Taiwanese machine tool manufacturers are expected to create higher profits.
Observing the display of EMO's machine tool control system in 2019, it is found that in addition to showing that the entire system (including controller, servo motor and driver) can achieve accurate targets during machine processing, at the same time, by adding different APPs, the functions of the CNC system are expanded. Realize other kinds of auxiliary processing and management functions. The data collected by the sensors installed in the machine are collected and uploaded to the cloud platform together with the factory information, and then presented to the manager through the situation room, combined with cloud technology, no matter where the manager is At any time, as long as you can connect to this information platform at any time through the Internet, you can instantly grasp all the conditions of the production line, including the status of the equipment, which operators are online, which products are produced, the execution progress of the work order, the production yield... etc. In turn, it provides important information for problem monitoring and improvement at the production site and the formulation of optimal production strategies.
To integrate the internal resources of the factory (including machine and equipment system information, workers' technology and knowledge) and market demand information, develop smart production models, and improve product quality. In the European Machine Tool Show, many manufacturers put forward solutions such as Industry 4.0 and machine networking based on the existing digital and automated stand-alone machines. At this stage, machine networking is mainly through the Smart Machine Box, which connects the controller, I/O, or sensor of the machine through the Smart Machine Box, and collects the information of the machines and equipment in the factory to the Smart Machine Box. , Through a series of mechanical code program translations, the production status in the factory can be visualized, and then the problem monitoring and improvement at the production site and the important information for the formulation of optimized production strategies can be provided. Due to the conservative attitude of manufacturers in China and major manufacturing countries towards equipment investment at this stage, manufacturers are only more willing to install new equipment upgrades on familiar old machines. Machine networking can lower the manufacturer’s psychological threshold on the one hand, and provide Intentionally introduce new options from the industrial Internet of Things (IIoT) technology manufacturers.
Faced with the slowdown in global economic growth, the phenomenon including the recovery of the US manufacturing industry did not meet the original expectations. Mainland China and the Euro area still have doubts about the decline of the manufacturing industry and the slow recovery of the manufacturing industry, and other emerging markets in Asia such as Malaysia, Thailand and Indonesia and others are affected by the exit of the US QE and the slowdown in global economic growth, showing a recession. Besides, the U.S.-China trade war has prevented manufacturers from various countries in China, delaying investment in manufacturing equipment. The aforementioned factors have led to a decline in the output value of Taiwan's machine tools. If Taiwan's machine tool factory can strengthen its system integration (System Integrate) capabilities, develop automated flexible manufacturing units, and at the same time development of the machine networking function of client factories in combination with Industrial Internet of Things (IIoT) technology to provide end-users.
The products of the overall solution not only lay the foundation for the future development of smart automated flexible manufacturing units in Taiwan but also lower the threshold for the introduction of end-customer equipment. Only in this way can Taiwanese machine tool manufacturers win in this wave of global economic growth opportunity.