Opportunities and Challenges in the Smart Machinery Market

Manufacturing upgrade

Taiwan’s machinery industry promotes the upgrading of Taiwan’s manufacturing industry, and its structure is dominated by small and medium-sized enterprises. It covers 25 machinery industries (including machine tools, industrial machinery, machinery parts, robots, and other general-purpose machinery, etc.) accounted for about 7.4% of Taiwan’s manufacturing output, and exports accounted for about 6.8% of total domestic exports and provided many employment opportunities, which contributed significantly to stabilizing domestic employment and promoting economic prosperity.

Taiwan’s machinery industry has the advantage of clustering, and the upstream, middle, and downstream are closely connected to form a sound satellite system. With long-term accumulated manufacturing technology and experience, coupled with a dense network of cooperation and division of labor, it has developed into a cost-effective and highly exportable system. The oriented industrial pattern makes Taiwan products have good competitiveness and can still develop steadily in the ever-changing global environment. Among them, central Taiwan has the highest density of precision machinery clusters, which have an important influence on the global manufacturing system. The performance of important sub-industries such as machine tools and woodworking machines in export is even more amazing around the world. According to the import and export statistics of ITC under the United Nations in 2015, the export value of Taiwan's woodworking machines and machine tools is ranked 4th in the world, showing the competitive advantage of Taiwan's machinery industry clustering effect.

Although Taiwan's machinery products have a competitive advantage in the global market, in recent years advanced countries such as Germany and Japan have launched a low-price competition in the market with superior brands. China and South Korea have also engaged in low-end and low-end product bargaining competition, making the Taiwan machinery industry is facing challenges. So, need to suddenly To overcome this disadvantage, one must rely on the improvement of the overall industry’s own technology and the cooperation and integration of related industries in order to stand out in the future global competition. In the future, the development trend of the global manufacturing industry will shift from centralized mass production to market demand for customization and rapid product development. At the same time, the value-added services of data analysis and application will be used to construct the value of industrial innovation. The industrial structure will also transform from a relatively closed vertical supply chain system to a more flexible and open industrial ecosystem. Taiwan is facing the dual challenges of shrinking employment and international competition, so it must effectively adjust its industrial structure and break away. Traditional labor-intensive pure hardware manufacturing thinking, integrating service value, and promoting industrial innovation and transformation is an important direction for the future development of Taiwan's machinery industry.

At present, major countries in the world are actively seeking industrial upgrading and transformation in response to changes in the industrial environment. In addition to the most high-profile German Industry 4.0-related industrial policy promotion, it also includes the United States’ "AMP Project", South Korea’s "Manufacturing Innovation 3.0 Strategy" and China’s "Made in China 2025 Plan", which all actively strengthen the foundation of its machinery industry. And then drive the development of related industries. In 2016, Taiwan proposed an industrial policy centered on innovation and R&D in five major industries, including the smart machinery industry. The main purpose is to upgrade Taiwan from precision machinery to smart machinery, in order to create jobs and expand the output of the entire planet, and to drive the central region of Taiwan to become the capital of smart machinery. therefore, the Ministry of Economic Affairs plans to promote the "Smart Machinery Industry Promotion Program". This policy will integrate Taiwan's new creative energy and establish technology applications and service energy that meets market needs to create the next wave of growth momentum for Taiwan's machinery industry.

Facing the competition and cooperation between technology leaders such as Germany and Japan and technology followers such as China and South Korea, Taiwan’s machinery industry should move towards high efficiency, high precision, high customization, intelligence, and whole-plant application, and get rid of the past. The general-purpose stand-alone product is the main product, and the product is prone to price competition due to the failure to grasp the needs of end-users in real-time. Therefore, in addition to the development of key technologies and products, the "Smart Machinery Industry Promotion Plan" will also use smart technologies such as the Internet of Things, smart robots, and big data analysis, while strengthening the application of domestic controllers, and combining aerospace, semiconductors, and mechanical equipment, metal transportation, electronic information, energy, 3C, food, and textile industry application needs, promote smart machinery, smart manufacturing system, whole plant, and whole line application and smart factory and other smart mechanical equipment and smart manufacturing application solutions, and establish compliance terminals The technical application service energy required by the industry enables Taiwan's machinery industry to seize the market with a small amount of diversified, flexible manufacturing, and a large number of customized products to strengthen its industrial competitiveness. Expected to be guided by the government, and integrate inter-ministerial resources and key technologies to independently attack the trillion-yuan mark, and promote the development and innovation of Taiwan's machinery industry.

The so-called smart machinery is the integration of various smart technology elements to enable it to have smart functions such as fault prediction, accuracy compensation, automatic parameter setting, and automatic scheduling. Its scope includes complete equipment, components, robots, Internet of Things, big data, CPS, sensor, and other wisdom industries.

There is a wide range of machinery. Based on the data of the Statistics Department of the Ministry of Economic Affairs, the smart machinery industry can include machine tools, industrial machinery, and ICT industries, including more than 40 industries. The connotation of the "Smart Machinery Industry Promotion Plan" lies in the construction of a new ecosystem of the smart machinery industry to enable Taiwan has become a global R&D and manufacturing base for smart machinery and a provider of overall solutions in the field of terminal applications. The so-called ecological system of the smart machinery industry is based on the precision machinery industry, combining information and communication technology and smart technology to upgrade precision machinery to smart machinery, and build Domain Know-How applications to provide total solutions and establish Taiwanese industry competition advantage. At the same time, with the aerospace and semiconductor industries as the priority training field, the whole factory will be built to output foreign R&D energy, and consumer needs will be quickly connected with the application industry to provide innovation, branding, customization, and intelligence product or service. The "Smart Machinery Industry Promotion Plan" includes smart machinery industrialization and industrial smart mechanization. In the part of smart machinery industrialization, it will deepen the medium and long-term layout and product innovation of smart machinery independent technology, and develop solutions-based smart machine products, with the goal of establishing China's smart machinery industry ecosystem; in the industrial smart mechanization part, The goal is to promote the introduction of smart machinery in the industry, make good use of the advantages of Taiwan’s electronics and communications industries, accelerate the intelligentization and rationalization of the industrial supply chain, reduce the pressure of the labor force structure, accelerate the accumulation of human capital, and at the same time innovate industrial production processes to significantly increase productivity. The Ministry of Economic Affairs will build Taiwan’s smart machinery industry based on the past achievements in precision machinery promotion and the energy of my country’s ICT technology, introducing relevant smart technologies, and building Taiwan’s smart machinery industry with the three major promotion strategies of "Connecting Locally", "Connecting to the Future" and "Connecting to the World" New ecosystem.

• Connect to the ground:
  Taking advantage of the clustering advantages of the machinery industry in Taichung, with Taichung City as the core, connecting Changhua, Yunlin, Chiayi, and other regions integrating central and local resources, building a key intelligent machinery industry platform, effectively integrating Taiwan’s urban development plan, and providing industrial development Hinterland and demonstration area. Incorporate smart machinery into key projects of international cooperation and mergers and acquisitions, and integrate the tripartite energy of industry, university, and research, and strengthen industry-university-research cooperation and train professional talents by means of "training local search and research and development nationwide". At the same time, we will use international exhibitions and other methods to expand the global market, and build the central region into the global capital of smart machinery.
• Connect to the future:
  The resources will be focused on "long-term and new key areas", namely long product life cycles and new digital economy business models. In the future, industrial IoT technology will be built to gradually promote the intelligent flow of information among people, machines, things, supply, and demand. And promote aerospace, advanced semiconductors, smart transportation, green vehicles, energy, machinery and equipment, electronic information, metal transportation, food, and textile industries, and establish overall solutions between factories. In terms of core technologies, we will continue to establish key mechanical autonomous technologies and related application services to promote the import substitution of semiconductor niche equipment, smart vehicles, and smart robots. In the provision of trial sites, cross-domain cooperation in the development of aerospace machine tools will be strengthened, and the industrial division of the labor system will be integrated to construct a settlement. The operability will be verified through field trials on the application side, and then output in the form of system integration.
• Connect internationally:
  It is mainly divided into two parts: international cooperation and expansion of export sales. In terms of international cooperation, it will strengthen exchanges with the smart machinery industry in Europe, the United States, and Japan, introduce foreign technology and cooperate with international manufacturers; in terms of expanding export sales, it will be systematically integrated and exported. Promote the overall sales plan of machine tools in overseas markets and strengthen the marketing of smart machinery in the aerospace industry, and further integrate the resources of the ministry to assist the industry in expanding the international market. In the future, the government will work closely with industry players to create a capital of smart machinery and make Taiwan the most important demonstration field in Asia. At the same time, various policy tools are widely used to encourage investment and the development of smart machinery and form multiple encouraging effects. In addition, a national-level industry-university-research team will be organized to break through the forefront of industrial technology and pursue global top value. In the part of industrial integration and marketing, it will upgrade industrial IoT technology, shape an industrial ecological chain that is closely integrated with upstream, midstream, and downstream, and strengthen the system integration output program of aerospace and other industries to expand the international market. It is expected to build a central and local resource platform through inter-departmental meetings to promote the introduction of domestically produced machinery and equipment into domestic advanced process applications to achieve import substitution benefits, and to assist the industry in the development of key components of smart machinery, the development of high-end sensing technologies, and IoT cloud technologies Establish smart system solutions, set up industry-university talent identification centers and talent training, provide smart talents, and provide relevant assistance in corporate export financing and mergers and acquisitions. Finally, the annual growth rate of the output value of smart machinery will double. The compound annual growth rate of the smart machinery industry is expected to be 2% in 108 and over 5% in 112.

The "Smart Machinery Industry Promotion Plan" is only the beginning of the promotion of industrial upgrading. It can be revised at any time based on changes in industrial needs and trends, and become a promotion plan that keeps pace with the times. At the same time, this program is jointly cooperated by the central and local governments to provide SMEs with assistance in innovation, international marketing, and funding. In the future, through the implementation of smart machinery industry promotion plans, machinery and equipment manufacturers will have the ability to provide complete solutions. At the same time, Taiwan is urged to accelerate industrial upgrading, and through the construction of smart production lines, through the cloud and the Internet to quickly connect with consumer needs, forming a networked manufacturing service system. It is hoped that through this program, Taiwan will become a global R&D and manufacturing base for smart machinery and an overall solution provider in the field of terminal applications.

The impact of COVID-19 on the mechanical product application market

The COVID-19 epidemic has had a major impact on global economic development. For example, the adoption of border control measures by various countries has led to a sharp drop in the number of global tourists. From January to May 2020, the loss of global tourism revenue will reach 320 billion U.S. dollars. The sharp drop in tourism demand has also led to a drop in air transport demand and a sharp drop in new passenger aircraft orders. In addition, the global market, including products such as automobiles, smartphones, apparel, and sports shoes, has also been significantly reduced compared to before the outbreak. Automotive and aerospace components, as well as 3C product components including mobile phones, are the main application industries for various types of machinery and equipment. In addition to the short-term reduction in product market demand that will affect the demand for mechanical products, the revenue and profit of many manufacturing companies have been greatly reduced by the impact of the epidemic, which may also affect the production investment in the next 1 to 2 years, as well as the mechanical equipment products. purchase.

After the outbreak of the COVID-19 epidemic, due to supply chain disruptions, factory shutdowns, and reduced market demand, it has had a major impact on the production of major machinery products worldwide.

1. Automobile industry
   • In China, the United States, and Europe, car sales in 2020 will decrease by 14-22% compared to 2019.
   • The China Association of Automobile Manufacturers stated that the cumulative sales of automobiles are estimated at 12.34 million units, a decrease of 12.7% from the same period last year. Among them, passenger cars decreased by 18.6% annually, and commercial vehicles increased by 14.3% annually.
   • Japanese Toyota and Honda cars, the sales value from April to June of 2020, decreased by 40% and 47% respectively compared with the same period in 2019. Toyota's global sales from January to June decreased by 21.2% compared to 2019.
2. Aerospace industry

   The COVID-19 epidemic has led to a sharp drop in demand in the global air passenger transport market. In addition to reducing flights, airlines have also canceled many new passenger aircraft orders. As the number of flights has decreased, the demand for components used in passenger aircraft maintenance has also decreased.

   • From 2020 to 2028, the global demand for new commercial airliners (single-aisle and wide-body) will be reduced by 25-50% compared to the estimated value before the COVID-19 outbreak; in 2020, the global large commercial airliner MRO (maintenance, repair, modification) market demand will decrease by 50~67% compared to 2019.
   • The revenue of The Boeing Company in the first quarter and second quarter of 2020 in the United States decreased by 26% and 25% from 2019, respectively. As of the end of July, more than 800 new machine orders have been canceled.
   • Airbus SE delivered 196 new aircraft in the first half of 2020, a 49% decrease from the same period in 2019.
3. 3C products

   In the first quarter of 2020, global smartphone shipments were 299 million units, a decrease of 20.2% from the same period in 2019; Gartner predicts that global mobile computing devices (PCs, tablets, mobile phones) will be sold in 2020 of approximately 1.866 billion units. This is a decrease of 13.6% from 2019.

Taiwan's machinery products export and output value performance under the epidemic

From January to July 2020, the export value of Taiwan's machinery products was 12.278 billion U.S. dollars, a decrease of 11.93% compared with the same period in 2019. China and Hong Kong, the largest export markets, the export value of machinery products from January to July 2020 decreased by 10.24% compared with the same period last year; the export value to the United States and India decreased by 33.88% and 55.53% respectively compared with the same period last year; to the new southbound countries and European countries the export value decreased by 18.81% and 23.23% respectively compared with the same period last year.

In terms of individual products, from January to July 2020, the export value of metal processing machine tools was 1.275 billion U.S. dollars, a decrease of 32.02% from the same period in 2019. China and Hong Kong, the largest export markets, the export value from January to July 2020 decreased by 22.53% compared with the same period last year; the export value to the United States and India decreased by 3.98% and 40.71% respectively compared with the same period last year; the export value to the new southbound countries and European countries, A decrease of 44.50% and 46.60% respectively over the same period last year.

For textile machinery, plastic and rubber processing machines, ball, roller bearings, and transmission shafts, the export value from January to July of 2020 will be 4.35, 5.10, and 953 million US dollars, respectively; compared with the same period in 2019, a decrease of 13.14% and 11.45% respectively, 6.38%.

On the other hand, affected by the continuous growth of global semiconductor product demand, from January to July 2020, Taiwan's semiconductor equipment exports amounted to US$2.442 billion, an increase of 9.78% over the same period in 2019.

Challenges to the development of the machinery industry under the new normal of post-epidemic

1. Major trends in global manufacturing development

   The U.S.-China trade war in 2019 and the COVID-19 epidemic in 2020 have brought important changes to the development of the global manufacturing industry, including market demand, international supply chain operations, and corporate operations management.

   • Market demand and consumption pattern:
     Although the COVID-19 epidemic has had an impact on the demand for tourism, aviation, automobiles, 3C products, and textiles, it has also triggered demand for medical and personal protective equipment, and hardware and software products for homework. On the other hand, physical store operations are restricted, and the proportion of online procurement and delivery services is rapidly increasing. And in response to the needs of epidemic prevention, various zero-touch consumption business models have become a new science.
   • International trade situation and supply chain layout:
     The production reduction and shutdown of factories caused by the epidemic, as well as the interruption of raw material supply and logistics transportation, have caused many manufacturing industries to rethink the advantages, disadvantages, and risks of the Just in Time operation model; and increase the resilience of the supply chain and manufacturing system as a priority strategic goal for adjustment. In response to the government’s need for epidemic prevention, many manufacturing companies have rapidly changed from the original industrial products to the production of medical products (such as masks and respirator components) under the existing production system, which also reflects the importance of flexible application of production equipment and production lines. Sex. On the other hand, the manufacturing supply chain triggered by the US-China trade war has left China or has become China +1 (N). With the outbreak of the epidemic, the US and its allies have begun to accelerate their consideration of future cooperation models with other countries and launch other the supply chain improves the flexibility of the business model.
   • Enterprise operation strategy and management:
     The global pandemic has driven companies to redesign new operation management plans and growth strategies. For example, in order to maintain the health of employees and customers, increase the proportion of employees at home and work remotely, and strengthen cooperation with suppliers and customers through online collaborative operations have become a new solution commonly adopted by many manufacturing companies. How to accelerate the digitization and digital transformation of enterprises so that they can reduce the impact of the epidemic and changes in the overall economic and trade environment, rediscover growth momentum and establish competitive advantages, has also become an important issue for business managers to face.
2. Strengthen the competitiveness of the machinery industry through digital transformation

   Digital transformation is based on digital technology, through product and service innovation, and a more competitive business model to help companies continue to develop and grow. include:

   • Integrate digital tool applications for digital communications, the Internet, information technology, and data science.
   • Disruptive innovative application technologies, products, and services that break the current market balance.
   • A business model that can enhance customer value and form new competitiveness.

   For Taiwan’s machinery industry, digitalization and digital transformation have the following potential benefits:

   • Improve product development strength: including product upgrades, reliability, accuracy, and stability improvements, product function innovation, and product differentiation.
   • Promote business model innovation: Including the development of customer demand-oriented innovative business models, the realization of customized cloud smart services, the establishment of All-in-One integrated solutions, and the discovery of the added value of different business models.
   • Strengthen market development capabilities: customer demand-oriented market service capabilities, market development capabilities in response to regional needs, and product marketing and after-sales service capabilities that combine physical and digital channels.

Machinery and equipment manufacturing companies will go through four levels when they promote digital transformation: At present, most manufacturers in Taiwan's machinery industry are still grouped in the first level (digitalization of tools) or the second level (integrated applications of digital information). Some manufacturers have begun to develop towards the third level (continuous innovation of products and services based on digitization). At present, the research and development and application of smart machinery and smart manufacturing solutions actively promoted by all walks of life are an important approach to assist companies in achieving the third level of digital transformation and moving to the fourth level (organizational function and business model innovation).

For Taiwan’s machinery industry, the recent US-China trade war and the COVID-19 epidemic are key factors affecting the development of business operations. In the next few years, the industry will still need to face the US-China technology war and the post-epidemic new normal environment. Challenges coming. Facing the new normal under the post-epidemic situation, promoting digital transformation will be an important way to rebuild the competitiveness of the machinery industry.

Future market trend: Digital investment in the manufacturing industry can be made in two major directions: based on existing equipment, digitalization under the production line, smart upgrades, and the establishment of digital software (including related hardware facilities) that can enhance the existing production system. For Taiwan’s machinery industry, on the one hand, it can reshape its competitiveness through the digital transformation of enterprises; on the other hand, it can grasp the digital needs of the global manufacturing industry under the new normal after the epidemic, and accelerate the development of digital solutions for existing equipment and production lines. Plan to secure huge business opportunities. Although compared with other countries, due to the successful epidemic prevention in Taiwan, the manufacturing industry is less affected by COVID-19 on the production side, but it may also cause companies to promote digitalization and digital transformation because of the impact of the epidemic. The motivation for digitalization and digital transformation is not as strong in other countries. If Taiwan’s machinery industry fails to grasp this wave of digitization, the market competitiveness in the future may be widened by competing countries.