Tuesday in Taiwan

(Continued from: A visit to Taiwan)

Tuesday:
Everywhere you go, there are problems. I shared some informal conversation with a couple of Taiwanese business managers today, and that’s what I learned.
For example, they worry about the education their children are getting. There are so few university positions available here, that getting an advanced education is an art form that begins in grade school. Children become so good at testing that the adults wonder whether they’re actually learning anything useful – or if they’re just getting an education in test-taking.
We have Generations X and Y? They have a name for today’s 20-somethings: the “strawberry generation.” These young adults are tough and prickly on the outside, but turn into mush the slightest squeeze. Their grandparents suffered hardship to make money; their parents worked hard to make money. People feel that the Strawberries have always had money in their life and they’ve become spoiled and unwilling to suffer.
I thought I was back in Kansas, Toto.
Their government-funded retirement system tops out in the range of $100 US/month. So children ARE social security. You have them and raise them to take care of you. And making money isn’t something you do so you can have a good life or so you can buy new things. It’s not a means to an end. Making money IS the end.
We can complain about the quality of Taiwanese machine tools, or about the difficulty in finding parts. But for families here that are in the business of making machine tools, they won’t rest until they solve those problems are solved. That’s how they make money in a culture of humility – that is, learning from what others have to say.
Perhaps that is why the optimism here is so palpable.
Taiwan is booming, as are all its neighbors. It feels like everything here is going well, and it’s never going to stop.
Remember the go-go ‘90s, when prominent American economists (and stockbrokers!) were declaring that we had broken through the boom-to-bust business cycle to achieve a state of constant growth?
They sound like Eeyore compared to the people I met today.
In fact, reading the international newspapers here, pretty much everybody in Asia feels like the future belongs to them.

An interesting side-note from one of those newspapers:
A feature story in the Asian edition of The Wall Street Journal featured the Flying Pigeon bicycle company. It was the state-owned company that made the ubiquitous bike that everybody in China (that mainland) seemed to ride. There was one model. It was one speed and came in any color you wanted, as long as it was black.
In the late ‘80s, they sold 4 million Flying Pigeon bikes; to get on the waiting list for a bike cost each person roughly one-month’s pay.
Then the market began to change. Flying Pigeon’s customers began to buy cars. Or they started looking for bikes in different colors. And with changeable gears to help them up hills.
A few small companies began to make such bicycles until 1999, when Flying Pigeon laid off its last 10,000 employers and a group of managers paid for rights to the name.

The epilogue:
Those entrepreneurs who put Flying Pigeon out of business became some of the largest bicycle manufacturers in the world – doing the worst, along the way to Huffy and on-again-off-again Schwinn.
They are the leading suppliers to Wal-Mart, K-Mart and Target, accounting for 90 percent of all bikes sold in the United States. They sell a mountain bike to U.S. wholesalers for $35 apiece at a 3% margin.
That’s right: They literally make a dollar.
The American wholesaler makes $8 when it sells the bike to a retailer, according to the article. The retailer puts a $70 price on the bike – and makes $17.
Now, those former Flying Pigeon managers have started to build building mountain bikes that are competitive and stylish. They’ve outsourced production to Indonesia and Sudan – where labor costs less. They’re trying to break into the Afghanistan market, where people seem to need mountain bikes.
If it were fiction, could you write it any better than this?

HAHAHA China
Welcome to our world

Great story!
Dobber

Wednesday

Manufacturing Tapei is a small trade show, with 80 percent of exhibitors based in Taiwan. It was a good chance for neighbors/competitors to talk – which is why they were so happy to see me coming as the only international media representative.

When American Machinist surveyed readers just about a year ago, they told us the perception of Taiwan-made equipment is:
- low-cost to buy and own
- at best of average design (at best)
- inappropriate for precision work
- not useful where flexibility is demanded
- strictly off-the-shelf
- a spare-parts nightmare.
In other words, we think that “Made in Taiwan” still means what it’s always meant: If your cheap enough to buy it, you get what you deserve.

Here’s what I learned about the community of machine tool builders here:
- it’s diverse, with at least one player serving every market niche – from high precision to low; from high volume to low.
- it’s broad-based, with each company offering a full line in its niche.
- their machines are getting better and better. Taiwan’s design benchmark is Japan. In one case, a leading Japanese machine-tool builder is reselling Taiwan-made Chevalier machines to one of the world’s most demanding customers: Toyota.
- they build to customer specifications – probably more than just about any other machine-tool region of the world (possible exception being the specialized high-end machines of Switzerland).
- they have a better reputation and better market share in virtually every part of the world than they do in the United States.

Taiwan’s machine tool builders, as a generalization, haven’t yet figured out the American market. But they’ve been busy selling thousands of machines into the next countries most likely to come after U.S. jobs: Poland, Czech Republic, Turkey, South Africa, India.
And the task where they have the most work to do here isn’t building machines that we want and need. It’s how to market to Americans, and how to build a dealership system that serves everyone well. (There are, in fact, a good number of such dealers whose best attribute is customer service; but finding U.S. representation was the most common need I heard from the vendors I met).
Much of the equipment I saw today would fit better in mid-size job shops than anywhere else. It’s designed for easy set-up, low maintenance, high reliability and low cost. These are machines that put power over features. Their flexibility is what you make of it.
But some of it’s getting downright sophisticated. That snarky line you hear from time to time – “I wouldn’t want to fly on an airplane with parts cut on one of those…” – doesn’t apply: A good number of the jet engines made in the United States are, in fact, built with parts cut on Equiptop machines from Taiwan.
And some of the ideas are just clever – like Eyan’s 3-axis CNC sawblade sharpener. It’s designed to be more durable and precise than the usual 2-axis models, and less expensive than the large 4-axis sharpeners. It’s got a footprint the size of the ottoman in your TV room, and its rounded shape makes you want to pat it on the head whenever you walk by.

Tomorrow I’m driving two hours to the south, to Taichung – the center of Taiwan’s machine tool industry. I’ll see the manufacturing facilities and get a better sense of just how good these machines are from the inside.
But based on the trade show floor, I was impressed. You would have been, too.

Very interesting, very well written. Looking forward to more. In a sense, you are documenting history in the making.

Every read "In Search of History" by Theodore White? Great book from an American college grad who in 1938 decidied to become a "travelling student" before returning to America to become a teacher. He went to China and by default, became a war correspondent. Changed his life.


Steve

Steve,
Thanks for the kind words. I haven't read the book, but it's now on my list.
The interesting thing is that we can talk about Taiwan-made machines in a very different way than we could have talked about the emergence of Japanese machines 20 years ago. Then, they were threatening to overrun our own machine tool industry.
That, of course, IS the history. We have the luxury today of looking at Taiwan's technology as an opportunity.
The builder that kept coming to mind for me yesterday was US-based Haas, which has arguably done more than any other company in the world to serve the job shop niche with simple, straightforward machines that people want to buy.
The advanced machining centers out of Japan offer a lot of power and opportunity, and there are many reasons to buy and use them.
But Haas built its success by going the other direction. It understands the DNA of so many job-shop operators -- who are not only looking for reasons to finance a less costly machine, but who also SEEK the hands-on feel of a simpler machine.
There are plenty of people who would buy a pickup truck even if you gave them the money to buy a Lexus.
In that, Haas has done exceptionally well in the one area that engineers and metalworkers tend to dismiss first: marketing.
we're a feature/benefit culture in this industry. But Haas has a story-telling capability that creates tremendous affinity for people who think a certain way. They identify themselves as Haas buyers. That is the highest level of success in marketing.
This is where the Taiwanese are farthest behind the industry leaders -- not just Haas, but all of the well-known and respected brands: communicating to US buyers in a way that makes us say, "Hey, they're talking about me."
That's culture; it's going to take some time.

Bob, so how did you get into the machine tool trade and are you going to be the Fred Colvin of the 21st century?

I read "60 Years With Men and Machines" by Mr. Colvin and it is a fascinating book. Colvin had a sense of history and documented for us what his time period was like. Now if you could publish a work like "The American Machinist at War" I'd buy a copy in a heart beat. I've seen great stories from WW II about the technical hurdles that machinists had to overcome to produce Americas' war effort but never found a book about it. Tons of books about military aspects, political, military hardware, but never the machinists' effort.

Steve

Steve,
I'm more of the publishing business than the machine tool business. But I'm honored that you could put me in the same sentence as Fred Colvin.

Children become so good at testing that the adults wonder whether they’re actually learning anything useful – or if they’re just getting an education in test-taking.

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Bob,

Ironic, it takes a person in China to put in words the main problem of the US public school system. At least this idea is what I have felt for the past 10 years or so. It always been said, "Learn to walk before you run." Our system is too busy trying give our kids the ability to build rockets instead of giving a solid grounding of the basics.

Thanks for the reporting.


Thanks for the reporting,

Thanks for the reporting.

Click to expand...

Since you mentioned it, here's some more.

Thursday
First a correction: I made a factual error yesterday; Taichung is the 3rd-largest city in Taiwan, not the 2nd. Onward...

All my life, "Made in Taiwan" has been a cliche. It's been a label about a country far away that makes all the things you buy because you can -- not because you have to.
It's been an annoying little sticker that eventually gets thrown away -- sometimes because I peel it off, and sometimes because I leave it affixed.
It's been a symbol of some kind of vague discomfort.

This morning I met Henry Chen, deupty manager in the sales department of Yeong Chin Machinery -- a company that produces equipment that you might know as YCM or YCI.
The company is 52 years old and has a sprawling manufacturing compound in Taichung. It is, I think, the largest machine tool maker in Taiwan and, unlike most competitors here, the largest amount of its output gets put to use in Taiwan.
Henry won't answer whether it's the largest. That, he says, while pantomiming shooting a shotgun, "is like being the bird at the top of a tree."
In the late 1970s, when much of the world thought China was preparing to overrun Taiwan and forcibly end its tenuous state of autonomy, the island's economy faced a crisis: businesses were refusing to reinvesting or expand. Why would they, when most people assumed it was eventually going to be forfeited to the communist government of the mainland?
The family that owned YCM, however, put all of its resources into building a new manufacturing campus. Today, that campus looks careworn and tired. But it has become a symbol for Taiwanese confidence. Three of Taiwan's presidents have visited the plant for photo ops, which is sticky for YCM today because it does business in China --and wouldn't do as well if the Chinese government observed any kind of political agenda.
When the facility was built, the company founder said it was his goal to replace all of the equipment on the plant floor with YCM machines. In other words: only YCM machines should be good enough to build YCM machines.

They're getting close. Many of the largest machines are 20-year-old prototypes. YCM also has its own foundry, and produces its own castings for most of the equipment.
YCM also builds its own spindles -- specified at up to 30,000 rpms. It mills them in a climate-controlled room on a five-station Yazda that's big enough to park a car in, and is secured to concrete footers sunk deep into the ground.

The facility looks old, but it's about to receive a major overhaul. One of the two assembly facilities - used for the high-value 2-column machines, has already been air-conditioned to improve manufacturing integrity. It's important because the company is aggressively developing new products. Henry indicated that 40% of current-year revenue comes from products that didn't exist three years ago.

The next three companies I saw -- Paragon, Pinnacle and Yida -- were all smaller. But they also had stories of confidence. All 3 had just completed moves into new manufacturing facilities. All cited the need to improve manufacturing conditions to accommodate the increasingly precise machines they are now building. Most of these machines are going to places like Turkey and India -- which are ave pushed the manufacturers that they already know best to begin producing more sophisticated machines.
Yesterday, at the ribbon cutting ceremony for the Manufacturing Taiwan show, one of the dignitaries made this point:
Taiwan is home to 0.4% of the world's population. But in manufactured exports, it consistently ranks in the top 10.

That came to mind today while I was at the outbound shipping area at YCM. I had a moment of clarity, as I watched a skilled lift-truck driver wiggle a large, crated machine into a truck for export.

A large label was stenciled in black paint on the side of the crate: Made in Taiwan.

Suddenly, I wasn't looking at that phrase with American eyes. For a moment that lasted no longer than a deja vu, I saw it as the Taiwanese must: As a statement of pride.

Very interesting Bob, thanks for the posts...keep 'em coming !

Bob - you do a great service in writing this for us to read. Thank you.

Much of the US Manufacturing Sector has lost it's pride . . . pride to those with a short future is a Union bumper sticker with an american flag one minute and flipping the bird at management the next.

Until this changes - I think that Taiwan along with every other hungry nation who has learned to work hard for much less than we enjoy will gain ground at our expense.

Today, Friday, is my last full day here. I have a busy schedule and go immediately to the airport for a flight home that begins at midnight.

I doubt I'll have internet access or time to write anything about today until I'm back on U.S. soil. But I do expect to have at least one more post.

In the meantime, here's some thoughts on names:

We use our given names first and our family names second: Joe Smith is greeted as Mr. Smith.
I the Chinese language, it works the other way: Family name first, given name second. Huang Su is greeted as Mr. Huang.

All the business cards here have a mix of Chinese and English. My cards are inappropriate because they say "Robert Rosenbaum" but my name is Bob. Nowhere on my card does it instruct people to call me Bob. For the first few days, I explained that in America, everyone knows that Bob is the short name that goes with Robert, and on presenting my card most Americans ask, "Do you go by Robert or Bob?"
That usually brough a blank stare here, since business cards here are literally the instruction manual for how to greet a new acquaintance. So in China, I am now introdcing myself as Robert.

They also have trouble with a long last name like Rosenbaum. At the international hotel, where they desperately want to greet me by name, it comes out something like Rose-uhhhhh.

When I return to this part of the world, it will be with a business card that identifies me as Bob Ro-zen. That will become my Western name to Asians.

It's not an unusual approach. Here, everyone who speaks English also has a Western name. In most cases, that's the only name that I know, because their given Chinese name is only written in Chinese characters on the business card. Only one person, a waitress, was interested in providing me with her Chinese given name (Su-Laing).

I've met Eunice, Hank, Henry, Laura, Jack, Jessie, etc. I asked someone how people come by their Western names.

Some children receive them from their English teachers in school. Others pick names that are phonetically similar to their Chinese names.

But most people, I was told, choose their names --often by going through a book very much like the baby-name books I used to name my children. They look for names that sound pleasing to them, and that have a meaning they like.

So here's a thought for you: If you had the opportunity/need to give yourself another name today, and it could come from anywhere, what name would you give yourself?

Bob:

Your posts regarding Taiwan are very interesting to me.

1. I loved the comment on The Strawberry Generation "rough and prcikly on the ourside but mush on the inside." That pretty much describes the young generation in all developed countries.

They never have seen true hard times so they have no defenses in the face of possible hard times to come.

Who knows? We've been atlking about depressions and crashes that so far have refused to materialize, maybe there are so many people and so much money floating around that depressions may be a thing of the past.

2. Taiwan has always been somewhat of a mystery to me. There were times in the early 1970's when Taiwan was here begging dealers to take on their machinery lines. Most of the time we talk about Taiwanese machine tools but they also had large scale printing machinery for sale.

Unlike Japan, Taiwan has not fully shaken off it's "cheap" reputation. Maybe they want it that way, their quality has improved to a very real extent but the Taiwanese still want to play the price card.

Remember Formosa?

It was a Portugese colony at one time. There was a samll native population there.

Chang Kai Check was forced off the mainland of China by Mao Tse Tung. The majority of the present population are Chang's people and their descendents. They were called "The Nationalist Chinese".

When Chang got to Formosa the place was backward and undeveloped. the USA and later Japan are responsible for the development capital that formed today's Taiwan economy.

I can see why Japan and especially the USA wanted to keep Taiwan and the Mainland separate. Nowadays there is so much international investment going into the Mainland that many of the resaons are no longer strong.

In the long run the Chinese on Taiwan and the Chinese on the Mainland are probably going to want to get together. If the experience with Hong Kong is any indicator, any resistance to Taiwan going in with Mainland China may be an exercise in futility.

Bob - Have very much enjoyed your account of the trip to Taiwan. Thank you very much. As for a new name, when I was in grad school in the 1960's, we had a lot of Chinese and Taiwanese students, all of whom were really nice guys. (I really could not see, knowing them, how the USA got in such a bad way with China, and how China got such a poor governmental system.) I went by my name, Tyrrell, until they came to school. Boy! They could not get the R's and L's right, so I went by "Ty" for the duration, since it is apparently a monosyllable in all the asian languages. A.T.

Friday
I’m in the Encounter Lounge at LAX; it’s the retro space-age structure you see whenever a TV show needs to show an image of the airport. I’m having the first honest martini in a week; as much as I enjoyed Taiwan, they don’t know how to mix a dry cocktail.
It’s late Friday night in the United States – about the same time it was in Taiwan when I stepped on my flight home 14 hours ago.
Taking a redeye out of Taipei made for a long day. I started the morning in Taichung with several more meetings among machine tool builders. I returned to Taipei in the afternoon – a 2-hour drive – for a few more scheduled visits at the trade show, and then I departed very much in the mood for a long nap.
As an oddity of long-distance travel to the East, I get to take 2 redeyes in the same trip on the same day.
The leg from Taiwan to Los Angeles left Taiwan at just before midnight on Friday night. It flew more than 11 hours, crossed 9 time zones -- and the international dateline -- landing at 8:30 p.m. Friday evening. My flight to Cleveland departs at just after midnight.

Anyway...
There is an industrial conglomerate in Taichung called Fair Friend. It makes printed circuit boards, forklifts, machine tools and about a gazillion other things that I can’t remember. It's a structure that isn't so fashionable in the United States right now -- something about the tax laws and cost of captial.
Fair Friend was only founded in 1979 to distribute products made by Japan's Kobe Steel. It has become one of the largest, most successful industrial companies in Taiwan. It has thousands of acres of manufacturing capacity in Taiwan and China. It is building an industrial city in China that could become the largest machine tool center in the world.
I’d never heard of Fair Friend. I suspect few people in the United States have. But it is well known everywhere in the world except North and South America.
Fair Friend machine tools are already running in the United States, though under different brand names. Later this year, its own brand, Feeler, will begin to show up at shows and in proposals.
Learning about such a big company for the first time was a bit of a surprise. I read a lot; I have a natural interest about industrial titans. I should have known about this company.
It came as a startling reminder that the United States is not -- if it ever was -- the commercial center of the world.
Taiwan startups don’t, for the most part, try to capture the domestic market and then spread out. They begin with international aspirations.
In machine tools, the first stop always seems to be China – for a few reasons. China has the demand, it’s a familiar culture, and the language is shared and their history is intertwined.
Typically, that’s followed (in no particular order) by Korea, Vietnam, India and Turkey, Eastern Europe and Western Europe.
At some point, any company that gets this far will have signed an agent or some dealers in the United States. But they don’t seem to put much emphasis on those relationships. The equipment sold here ends up being sold under a different name. In terms of earnings, it’s just frosting.
That really isn’t a surprise. If you can make a lot of money selling hundreds of high-volume production machines to China, why break a sweat learning how to sell a few specialty machines in the United States?
The US is, as we all know too well, a place to sell machines one or two at a time – to small manufacturers and job shops.
Is this the reason Taiwan machines have such small presence here?
Perhaps. But I don't think it's the only reason. Geographically, the U.S. and Taiwan are about as far away as you can get. If you get any farther, you'd be closer.
The business cultures are equally distant from each other. Doing business in the United States brings a lot of prestige. But to fail there would be an embarrassing loss of face. And it's unfamiliar enough that failure is possible -- especially in a high-touch, personalized industry like machine tools.
Few in Taiwan will acknowledge that this might intimidate them.
But I no longer believe that Taiwan’s low penetration of the U.S. machine tool market is due to the quality of the machines they build – as is the widespread perceptoin.
I think Taiwan’s builders are engaged in productive procrastination. They're making so much money elsewhere, it's easy to put off the risky process of learning to do the same here.
That won’t last forever. More and more of Taiwan’s builders are getting tired of playing the price game. Consistently serving the role of low-cost provider is playing havoc on profit margins in an industry already known for thin margins.
They’re starting to talk like American businesses – “We don’t want to be the lowest price; we want to be the best solution…” They’re not all very convincing yet; most can’t resist the temptation to add the phrase “…at a low price.”
But it won’t be long before more companies embrace the philosophy of Fair Friend: Do both. Compete on price in low-end products, and develop high-end products that provide high-technology at high margins. For instance, Fair Friend just acquired a line of laser drills for manufacturing printed circuit boards that work 100x faster than the previous generation of machines. These will sell at a premium.
There’s one more factor that seems to come into play. Most of the machine tool companies in Taiwan are between 15 and 50 years old. The founding generation, conservative in the way it does business, is moving aside for the next generation -- many of them educated in the West.
This younger generation is more flexible in its approach to partnering, marketing and doing business.
Perhaps the United States is not the gateway to the world. But Taiwan’s machine tool builders have already gone to school on international business. They’ve gotten good grades.
Now, as they seek to build margins, the United States is graduate school.

Verrry interesting... Thanks Bob. Your observations and insights are welcome on these old ears.

Is this the reason Taiwan machines have such small presence here?

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Bob, to be honest, I'm mystified by that statement as it's my impression that Tawainese machines have a huge presence in the USA. In fact, if it weren't for the likes of Haas, Fadal and Milltronics..they would probably have taken over the mid range and lower CNC machines completely years ago. But while the CNC Tawainese imports have been kept in check by Hass since the mid 1990's, the Tawainese manual machine tools are a huge presence here by any comparison.

I have a sense of what you may mean however, in that when I thumb thru the lastest TAMI book, I'm struck by the sheer number of nice looking Tawainese machinery makes that never sees the light of day in the USA. There are many more Tawainese CNC machine tool manufacturers now than there were in the 1980's and 90's. It's amazing how much that industry has grown there, considering the exports to America have probably shrunk somewhat in the same time period.

In contrast, reviewing an early 90's TAMI book, I recognize most of the machines marketed by Victor, Kent, Acura, YCI SuperMax, Feeler, Goodway, Chevalier, Leadwell and Chmer. Regarding Fair Friend and their Feeler brand, they sold many thousands of their (manual and non cnc automated) Hardinge lathe copies here back in the 1970's and 1980's but have not been sucessful here with their CNC machines. Now the Hardinge lathe copies are left to Cyclomatic of Tawain.

But the latest TAMI is a whole nuther ballgame, with a amazing array of CNC machines I've never heard of, and never seen a single example of here. Tawainese names such as Mill Seiki, Jiuh-Yeh, and Phoenix are new to me. Mill Seiki for instance manufactures machines that remind me of Haas in a way, but they offer pretty much any control you want to run the machine (except Fanuc, NUM and Heidenhain apparently)..Anilam, Siemens, Fagor, Mitsubishi and their own Tawainese PC based control called "Syntec".

Some USA manufacturers were using Tawainese iron early on. I ran across a 1976 Brown and Sharpe no. 2 vertical mill at auction a few years ago and was astounded to find that it was made in Tawain ! And exact copy of the original B&S no. 2 machine, made for B&S in Tawain.

A number of Tawainese CNC makers came on strong here in the early 80's such as Leadwell and SuperMax. Leadwell sold thousands of VMC's here probably, but have faded from glory. Others, like YCI SuperMax have faded a little but seem to still have their following here. But, as I said, if not for mostly Haas, they would have had that spectrum of the market in America pretty much all to themselves by now.

motion guru-

Much of the US Manufacturing Sector has lost it's pride . . . pride to those with a short future is a Union bumper sticker with an american flag one minute and flipping the bird at management the next

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If you ever get tired of bashing unions and the American worker try watching this:

http://www.tv.com/john-ratzenbergers-made-in-america/show/25381/summary.html

Just a suggestion.

Steve

Bob-

How do the Taiwanese feel about China taking over their country, and do they feel America would protect them?

Steve

MH61... What's your point?

Upon cursory look-over the link you gave, and without guessing, I don't know how you relate this to unions.

Can you just summarize your feelings/opinion?