by Tony Liu, Fastener World Inc.

Renowned as “Kingdom of Hand Tools”, the production value and amount of Taiwan hand tool industry used to be in the first place around the world. It was then surpassed by China and Germany in 2003 and 2008 respectively. Many people worry if the hand tool industry will become a sunset industry. In order to increase its competitiveness, the industry formed a “T-Team” industrial alliance under the guidance of Corporate Synergy Development Center (CSD), overturning the traditional business competition and replacing it with organizational cooperation. Through the vertical integration of resources, it expects to create the multiple effect of “1+1=11” and constructs a prosperous future for the industry.

In July 2010, 13 finished products and processing companies including King Tony Tools, A-Kraft Tools, Machan International, Jhi Lung Tools, Shuter Enterprise, and William Tools officially formed “T-Team” in Taichung (Taiwan). The most important promoter of this project, CSD estimates that through the project the production cost can be reduced by 5-8% annually, increase the industrial competitiveness substantially, help companies earn more foreign orders, and seek for more profits. Project Manager of CSD, Giant Chang says that the team members will be closely connected to push TTEL (Taiwan Tools Excellence League) to take full charge of orders for OEM/ODM from globally circulated brands and at the same time get rid of the “single competition” business, adopt organizational cooperation to develop global market, and strengthen improvements of quality, cost, and delivery time in finished and processing plants. The complete specialization of global marketing and production are for making Taiwan become the heartland of specialized and industrial hand tools and the best partner of famous distributors.

Brand-induced Regional Competition  

Chief Strategy Officer of King Tony, Mark Wu analyzed that the current hand tool industry has become a technology intensive (rather than labor intensive) industry. Although the rank of Taiwan slid 2 places down, its annual production value and export still demonstrates growth of 5%, showing a market with growing demand. However, if Taiwan’s technology and scale cannot keep the pace with the speed of growth, that will be a fatality for the industry. ”If we keep doing without any change and stick to the strategy of low price, we’ll be surpassed soon someday!” Wu noted, there are about 630 hand tool companies in Taiwan with over 320 different brands. Such a brand competition overwhelms the domestic and foreign markets. Everyone has their own brands but manages them as a manufacturer indulging himself in price cutting. This is definitely not a good thing to do for Taiwanese industry.

Wu added, a new wave of industrial revolution dominates the recent 10 years. The mergence of distributors and the population of Internet caused famous brands from the U.S. and Japan like Facom and Koken become less influential and surpassed by “distributors’ brands.” That the power to control the distribution network means competitiveness has gradually formed. “Manufacture is the competition around the world while brand is the competition in the region. With over 20 years of experiences in the industry, Wu said, to review the current market condition, brands without distribution are equivalent to products with no brands! In recent years, the distributors’ brands dominate the global sales network and distributors; brands in the new emerging market develop very well. “This is the opportunity of our industry!” Wu said, Taiwan hand tool industry has mature technology, high quality workers, advanced managing service and ideas, and capability of customization. If it continues to develop high value added products, it is believed that it will definitely catch the attention of international distributors. 

Sharing of T-Team Resources and Achieve Scale Economy

“Group cooperation is the biggest advantage of us,” said Chang. Through the effective industrial integration and cooperation to do brand marketing and specialized manufacture, its members can share resources with each other, transform the competition into cooperation, create the scale economy, promote the QDC in the industry, and establish a firm base. Meanwhile, it can also strengthen the trust and union among them and lead the industry toward the development of high value added products. Chang said that 3 major member companies including King Tony, A-Kraft Tools, and Machan International will take the responsibility to organize a social union, which will help prevent market conflicts and boost the cooperation to develop international market. After the formation of TTEL, it’ll help boost the exposure of T-Team in the hardware media around the world, participate in the hand tool shows, and establish an “ international distributors’ brands order receiving center” to attract the orders for OED/ODM from international distributors.

“The competition will not be the competition between manufacturers and brands anymore but the competition in the entire supply chain. Only when the attitude of a “single fight” is abandoned can the entire industry be upgraded.” However, Wu frankly admitted, the promotion of T-Team in the past few years was the probation period, when every company had different ideas about the QDC and the integration of production management and operational procedures. It would take many years for it to exhibit the obvious efficacy. During the period, the patience and resolution of a member are extremely important.

ECFA Offers Benefits to Taiwan Hand Tool Industry

With ECFA being an international hot issue, Wu and Chang dare not ignore the power of Taiwanese products in China and international market. Wu considered, the low price is already not a strategy of Taiwanese companies and they should position themselves to the development of high value added products as well as fully utilize the zero tariff advantage after ECFA to grasp the high level hand tools demand in China, highlighting their recognition and developing international market. At the same time, TAIWAN can take advantage of zero tariff to import low level DIY hand tools from China, which will be marketed by Taiwan. As a result, Taiwan hand tool industry can see its bright future. Chang finally added, the strategy of developing high value added products is what T-Team is going to do. The transformation of Taiwan hand tool industry is worthy of being promoted and a way it should keep going on, albeit seemly endless.