Taiwan’s Plastics Machinery Industry to China: It's Not You, It's Me

By: Tony Deligio 18. August 2016

Despite being separated geographically by only the Taiwan Strait, which at its narrowest point is just 100 miles wide, economically, Taiwan and China are growing further and further apart.


China is still Taiwan’s largest trading partner—its geographic proximity and deep cultural and historical ties help maintain that status—but it is being targeted less and less by Taiwan’s plastics and rubber machinery makers, as they seek new markets on their own and at the behest of their government.


Touring Taipei Plas last week on a press junket organized by show sponsors TAITRA (Taiwan External Trade Development Council) and TAMI (Taiwan Assn. of Machinery Industry), myself and other trade journalists from around the globe sat down with numerous leading Taiwanese equipment suppliers. Many boasted export rates above 90% but none said China was their top market.


The pivot away from China is detailed here, and apparent in the fact that China’s share of Taiwan plastics and rubber machinery exports has dropped from 30% in 2013 to 20% in 2015, with further shrinkage in the first half of 2016.


In its show-opening press conference, TAITRA and TAMI officials detailed the country’s outreach via TAITRA’s 60 overseas offices all around the globe, specifically acknowledging dignitaries on hand from Afghanistan and Malaysia. Even within the press group, you could see this strategy at work as I was joined by reporters from Mexico, Russia, Indonesia, India and Japan.


In 2014 when I attended the show, many Taiwanese suppliers noted that as they invested in new production facilities, they were doing so in Taiwan, after years of almost exclusively building up factories in China. This time around, many of those same companies acknowledged that China’s market is driven largely by cost, while Taiwanese machinery is increasingly marketed on higher technology. Because of this, more than a few said they had all but given up on selling into the mainland.


Earlier this year, Taiwan elected a new president—Tsai Ing-wen—its first female leader and only the second from the Democratic Progressive Party—a party openly opposed by the mainland. Tsai campaigned in part on a “Southward” policy, seeking greater business and cultural ties in Southeast Asia, and she offered some interesting insights into the shifting dynamics between the Republic of China and the People’s Republic of China in this July 21, Q&A with The Washington Post:


Q: Isn’t China your No. 1 trading partner?


A: China is still our largest trading partner; however, complementarity between our economies is decreasing. We had the ability to organize a manufacturing process, and then we moved our manufacturing capability to China to make use of their labor pool. But now the situation is very different. [Chinese] labor costs are increasing, and China has their own capability.


Q: So China has become a competitor of Taiwan?


A: They are more and more our competitors.


Breaking up, as the song says, is hard to do; it will be interesting to see how "seeing other countries" is faring for Taiwan at the next Taipei Plas in 2018.


Advanced Manufacturing Has Outsized Impact U.S. Economy

By: Tony Deligio 10. August 2016

But overall impact is waning, pointing to need for federal and state-local strategies to boost the sector’s growth and broaden its reach.


Earlier this month, think tank The Brookings Institution released a report with those findings and more entitled “America’s Advanced Industries: New Trends” by Brookings Fellow Mark Muro, former Research Analyst Siddharth Kulkarni, and Nonresident Senior Fellow David Hart.


The report found that the overall sector expanded between 2013 and 2015, despite global headwinds, including China’s slowdown. That growth, however, was concentrated in a sliver of auto manufacturing and “tech” service industries, with three auto industries and four digital services industries taking up more than 60 percent of the nation’s advanced-sector growth during that time.


Forward 50
This report is a follow up on February 2015 paper by Brookings entitled “America’s Advanced Industries: What They Are, Where They Are, and Why They Matter”. In that, Brookings identified 50 industries that constitute the advanced industries sector. Those 50 were further broken down into three primary groups—manufacturing, energy, services—of which manufacturing was the largest with 35 categories.


Of those, many were directly related to plastics, like “resins and synthetic rubbers, fibers, and filaments” with more that touched on segments which rely heavily on polymers like aerospace and motor vehicle parts, medical equipment and household appliances. Resin and rubber was one of only 10 advanced industries that ran a trade surplus, trailing only royalties and aerospace.  


Why Do These Advanced Industries Matter?
These manufacturing-heavy sectors are so important to the U.S. economy because of their outsized influence on it. According to Brookings, the advanced sector conducts 89 percent of the nation’s private-sector R&D and generates more than 80 percent of the nation’s patents.


In terms of overall productivity, the advanced industries sector has grown about 2.7 percent annually since 1980, far faster than has the rest of the economy, which has managed annual productivity growth of just 1.4 percent.


Finally, there is the impact on trade. The advanced industries sector generates 60 percent of U.S. exports despite representing less than 10 percent of the nation’s employment.


Concentrated Growth
Despite slower growth from 2010–2013, advanced manufacturing industries still added more than 132,000 jobs from 2013–2015 period, taking up 20 percent of all advanced-sector employment growth. Roughly 70 percent of that employment growth came in three auto-related industries: motor vehicle parts, motor vehicles, and motor vehicle body and trailers


High-tech service industries were the leading source of advanced-sector growth in the 2013–2015 period, adding 500,000 new jobs over that time or 80 percent of new advanced-sector jobs. Nearly two-thirds of those came in four spaces: computer systems design, web search and internet publishing, software and products, and data processing and hosting.


Energy Bust
The advanced-energy sector has gone from a significant contributor in the 2010–2013 period to a “bust,” according to report author, Muro. “The U.S. ‘fracking” boom led to an oil and gas glut and energy demand stagnated worldwide.”


Going forward, the report sees two immediate issues to be addressed.


“This report speaks to two of the nation’s most pressing economic problems: its serious inclusion crisis and its stubborn productivity slump. On both counts, the vitality and expansion of the advanced-industries sector is crucial because the sector is the main source of the productivity growth and productivity-driving innovations and business models that support higher wages and rising living standards for the average worker.”


China Bets Big on Automation

By: Tony Deligio 27. July 2016

With the full brunt of the Chinese government behind it, the country’s industrial robot inventory is forecast to explode 2500% from 70,000 in 2016 to 1.8 million by 2025.


Those figures courtesy the China Center for Information Industry Development and shared in a July 26 webinar from the Robotics Industry Association (RIA). The RIA had three China robotics experts outline the market’s opportunities and the explosive growth it could create for western suppliers of industrial automation.


The webinar followed a statement from the International Federation of Robotics (IFR) detailing the same types of projections. In that report, Wang Ruixiang, president of the China Machinery Industry Federation (IFR), said he expects his country to join the top 10 nations in the world in terms of robot density—that is the number of industrial robots per 10,000 employees.


In 2015, that figure stood at 36 per 10,000, putting it at No. 28, well below the U.S. (152), Germany (282), Japan (323) and South Korea (437). With a stated goal of selling 100,000 domestically made industrial robots every year by 2020, the industry believes it can join the world’s leaders sooner rather than later.


Ruixiang’s comments came at the China International Summit of the Robot Industry, and they echo reports inside and outside China, from industry and government, on how robotics will help maintain the country’s status as the world’s factory. That factory will also make robots to be consumed in China and abroad. Currently, foreign robot manufacturers enjoy a 69% share of the Chinese automation market, but local players see a shift coming.


At a roundtable during the IFR’s most recent meeting in Münich, Daokui Qu, CEO of Chinese robot manufacturer Siasun, said that by 2020, he believes Chinese robot makers share of the domestic market would increase to 50%.


Regardless of where the robots are made, more and more of them are headed to Asia according to the IFR. In 2015, the region registered the highest sales figures for robots globally—156,000—up 16% from the year prior, with China taking up 43% of that total with 67,000, almost double the second biggest player, South Korea, with 37,000.


Opportunities for U.S. Automation Suppliers
During the RIA webinar, Nelson Lee, president of Sunels Tech & Capital Corp., noted that while there are 2600 domestic robotics and automation related companies in China, many are quite small, with 90% generating less than $16 million in sales. He also said they are forced to rely on imports of key components like reducers, servomotors and controllers.


Despite these challenges, Lee said the Chinese automation industry will continue to expand because of strong government support, including related policies. In fact, on March 21, the Chinese government issued a Robotic Industry Development Plan for 2016-2020, projecting that annual sales of industrial robots will reach 260,000 units by 2024, with the value of the industry to hit nearly $15 billion. To achieve these lofty goals, the domestic industry has sought to partner with western leaders—one example: Chinese firm Midea Group’s pursuit of global leader Kuka.


Economic Slowdown ≠ Robotic Slowdown
In the Q&A portion of the webinar, one questioner noted China’s relative slowdown economically and asked whether or not that would impact the burgeoning automation industry. For Lee, the retraction is actually a positive harbinger.


“China is now making its economy more efficient; getting out of low quality, low efficiency industries and focusing more on advanced manufacturing industries,” Lee said. “This policy basically helps the development of the robotic industry because robotics are so advanced. So even though China is slowing down, the government and companies are putting more effort into robotics.”


While many segments of the economy might elicit a tepid response in conversation, automation does not.


“Whenever we are in China—when we talk with officials and companies—once you mention robotics or robots, they get excited; they want to sit down and talk with you,” Lee said.


Those statements definitely reflect Plastics Technology’s own reporting on the pursuit of advanced manufacturing in the Middle Kingdom, here and here. (Pictured: attendees at Chinaplas 2015 in Guangzhou get up close and personal with automation).


Expanding Global Middle Class Equals Growing Energy Demand

By: Tony Deligio 13. July 2016

There is a clear correlation between economic growth and energy use, or put more mathematically—total people times higher living standards equals greater energy needs.


Larry Gros, ExxonMobil Chemical’s global polymer products and applications technology manager, shared those insights and more at injection molding machine and automation supplier Engel’s first ever North American Trend.Scaut Automotive event, held in Livonia, Mich., at the end of June (read more here and here).


Gros presented ExxonMobil’s Outlook for Energy to 2040—an exhaustive review of what types of energy would see what level of demand from all over the world. From 2014 to 2040, the energy and chemical company sees global energy demand rising by 25%, noting that:


All the world’s energy sources will be needed to meet rising demand to 2040, but there will be a marked shift toward cleaner fuels, particularly natural gas.


While other energy sources make gains, Gros noted that oil will remain the top energy source for transport and for chemical production, with natural gas demand growing more than any other source.


Other key themes explored by Gros included the fact that energy is fundamental to living standards, and because of this, developing nations—which will lead in growth of GDP and living standards over the forecast window—will also lead in growth of energy demand over that time.


In the U.S., per capita energy consumption equates to 7 equivalent oil gallons per day, while globally, the average is only 1.7 gallons per day. “We will quickly see issues if rest of world grows into U.S. levels of consumption,” Gros noted, adding that, “as technology advances, it will improve efficiency and mitigate energy consumption growth.”


Developing World Develops
In 2014, more than half the world’s global GDP of $72 trillion could be attributed to advanced OECD countries, but the fastest growth rates were occurring outside those states, in nations like Turkey, Iran, Egypt, Saudi Arabia, and South Africa. ExxonMobil forecasts that by 2040, global GDP will more than double to $150 trillion, with all countries making gains, but the fastest rates experienced outside the OECD.


In fact, by 2040, Gros said developing countries will officially account for more than half of global GDP, with China and India expanding at rates of 5% and 5.5%, while the OECD at large grows at a rate of 2% over the forecast period. The greatest growth on a demographic basis, will occur within the middle class, which is forecast to more than double to five billion people by 2030, with the majority of that growth once again coming in India and China. By 2040, 85% of the world’s population will live in urban centers in OECD countries, as the globe adds the equivalent of 30 Chicago's during this period.


Efficiency Gains Allow OECD to Do More With Less
Even though overall energy demand will expand by 25% across the globe by 2040, it will be flat in OECD countries, as efficiency gains allow these countries to do more with less. Meanwhile, the 1.2 billion people without access to electricity today will finally start to join the global energy market. As they do, Gros said oil and gas will remain the world’s primary fuels through 2040, but sources of energy will shift. Particularly for coal, which will see its share of demand drop from 26% to 20%, while renewable sources, natural gas and nuclear grow.


Emissions to Flatten, Decline
In terms of emissions, Gros said ExxonMobil is predicting that global carbon dioxide output will peak at 2030, and begin to decline afterwards, with emissions falling 20% in OECD countries through 2040.


Fuel Standards Globalize
Transportation remains a key driver for energy demand, and Gros noted that the advent of stricter fuel standards globally will have a huge impact. “In 2008, only four countries had mandatory fuel economy standards, while some others had voluntary ones,” Gros said. “In 2014, many more adopted regulations, and now about 90% of light duty demand is in countries with standards or developing standards.”


Gros said global demand for light duty vehicles will peak in 2020, but added that there will not be fewer cars—with a global fleet of 1.7 billion by 2040—just that tomorrow’s cars will be more efficient (he also said China will surpass the U.S. in 2025 as the country with the most vehicles). Part of that efficiency will come from resins. Gros explained that without plastics, current vehicles would be about 10% heavier, adding that that 10% weight reduction leads to about a 7% improvement in fuel economy.


Instead of electric vehicles, Gros and ExxonMobil expect to see a big jump in hybrid vehicles, with those accounting for one quarter of the global fleet by 2040. 


Europe’s Plastics Machinery Manufacturers Concerned Over the UK’s “Brexit”

By: Tony Deligio 6. July 2016

The United Kingdom is both an important export market for Europe’s plastics suppliers, as well as a location for independent subsidiaries.


In a July 4 press release, Germany’s plastics and rubber machinery association (VDMA), which at 3100 members claims to be the largest industry association in Europe, noted “with regret” the British decision to leave the EU.


The releases subheads summed up the VDMA’s anxieties, stating “Great Britain until now an important market for the industry” and “Uncertainty over future ties with EU cause for concern”.


VDMA President and head of eponymously named extrusion equipment supplier Reifenhäuser, Ulrich Reifenhäuser noted that for two year’s running, the United Kingdom has been the seventh largest export market for Germany machinery, rising 6.6% in 2015 to a value of 152 million euro. In the first quarter of this year, the U.K. actually jumped to the fifth spot, rising 25.9%.


Thorsten Kühmann, the VDMA’s managing director said in the release that many of the group’s members have branches in the UK, adding that “these close ties between our UK partners and the continent will not change.” The release however went on to say:


Plastics and rubber machinery manufacturers do however fear that Brexit will have an impact on investment decisions and hope that the period of uncertainty will be as short as possible.


Many German and Austrian machinery companies have long-standing ties to the UK with Engel UK Ltd. and Arburg Ltd. in Warwick since 1963 and 1992, respectively. Those firms are joined by many other independent subsidiaries including KraussMaffei Group UK in Warrington, Cheshire and Wittmann Battenfeld Group UK, in Wellingborough.


Speaking at his company's Automotive Trend.Scaut event in Livonia, Mich. on June 29, Engel CEO Peter Neumann acknowledged the questions the UK's move poses for companies like his. "With the Brexit complete, we now have a new challenge," Neumann said. "No one really knows what will happen, but the next few years will show what influence this will have to the European economy."


Graeme Herlihy, managing director of Engel's UK subsidiary, which has 34 employees, told Plastics Technology it's too early to gauge any impact. "There's been plenty of talk, but nothing concrete," Herlihy said. "Orders are continuing to come in from projects that were under discussion pre Brexit. I think it will take much longer to establish what the impact will be.


The disruptive vote was held Thursday June, 23, with 71.8% of eligible voters, or more than 30 million people, participating, according to the BBC. By a 52% to 48% margin, “leave” voters pushed through the so-called “Brexit”, in a referendum that saw the highest turnout for a UK-wide vote since the 1992 general election.


The day before the vote on June 22, VDMA’s Chairman Reinhold Festge posted an editorial entitled “Europe Cannot Be Allowed to Die”, pointing out the EU’s deficiencies but also noting its overall positive influence on the region.


The history books might show that my generation was too lenient towards the bureaucracy in Brussels, but I am nonetheless convinced that the only alternative to this EU is a reformed, transparent and effective EU. A return to national egoism would certainly do nothing to help Europe assert itself against the increasing competition of a globalized world.


In its post-Brexit release, the VDMA said the British Plastics Federation should continue to be a member and partner of the European umbrella organization EUROMAP.


In a June 24 release laying out its expectations for 2016, the VDMA actually revised its outlook 2% higher. Whether that holds given the tumult the region is experiencing in the wake of the Brexit vote remains to be seen.


In the release, VDMA notes that 2015 output was up by 4.7% with exports 1.6% higher, before adding that business since then had “picked up markedly, prompting the positive forecast for 2016.” The VDMA cited momentum in sales to EU customers and North America. Specifically, the U.S. topped the sales market rankings, followed by China, Poland and Mexico.


In March, the Italian plastics and rubber machinery supplier association, Assocomaplast, reported its 2015 results, which marked an all-time record for exports of 2.9 billion euro, topping the previous high in 2007 of 2.75 billion. Sales to the EU helped push Assocomaplast members to that record, rising 11%. 


Assocomaplast's Stefania Arioli said the UK was the seventh-largest export market for its members in 2015, accounting for more than 112 million euros in machinery, equipment and molds. Arioli noted that extrusion equipment is a particularly strong market for its members in Britain. Arioli added that Brexit was a hot topic at the association's most recent meeting, held June 28.


"Though operators fear the possible consequences," Arioli told Plastics Technology, "generally speaking, we believe it is better not to let emotions overwhelm us. A real evaluation on its impact could be done in a few months." 


The View From The States
The UK is the U.S.'s ninth largest export market, accounting for more than $1.3 billion in goods in 2015, according to Michael Taylor, VP international affairs and trade for SPI. Taylor said that day-to-day operations of businesses in the U.S., UK and EU might not immediately feel an effect, but added—"All businesses engaged in the transatlantic market should prepare for the changes that are inevitably coming." 


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