Home > Flexibility, focus and drive: the future for manufacturing Part One

Flexibility, focus and drive: the future for manufacturing Part One

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The global market is in flux, as changes in China prompt a shift of low-cost manufacturing to countries like Vietnam and India.

And while China’s demand for Australia’s natural resources slows, a burgeoning new market of upwardly mobile consumers presents new opportunities.Australian companies, whether they are seeking engineering and manufacturing partners, or looking to enter the Asian market, may do well to turn their focus on the island state of Taiwan.Like Australia, Taiwan has an IP-centric industry.

It is known as a hub of electronics hardware development, having successfully captured a big chunk of the ICT, semiconductor and smartphone manufacturing market.

While manufacturing around the world continues to be suppressed by economic conditions, Taiwan’s Ministry of Economic Affairs reported in June 2013 that among the major manufacturing industries, sectors with high IP, such as ICT and electronic components and parts, maintain mild growth and continue to play a key role in the country’s economic development.

Even so, while Taiwanese manufacturers have successfully leveraged their balance of low-cost labour and R&D capabilities, the country is now in a state of transition as it looks to continue reducing costs, while focusing on new growth areas, such as automotive and connected mobile technologies, in order to revitalise its manufacturing sector.

R&D focus opens new markets
Audio equipment manufacturer Audio-Technica Taiwan, whose facility is located in a rural area of Taoyuan, started off as a manufacturing plant, but quickly gained R&D capabilities.

Today, the majority of Audio-Technica’s consumer-grade mid-to-high end headphones and microphones are developed primarily by the Taiwanese team, while high-end professional R&D is carried out in Japan and the US.

Most of the raw material and internal electronics are sourced locally.

With nine production lines, around three shipping containers worth of headphones and microphones are exported from the facility every week.

However, unlike Sydney-based RODE Microphones, which emphasises automation for consistent and cost-effective production, Audio-Technica Taiwan retains a lot of manual work in its short assembly lines.

According to Director and General Manager Kazuhisa Kondo, the decision to eschew automation is due largely to the rapid R&D environment, which seems Audio-Technica Taiwan pushing out new products in short runs.

This means re-tooling costs eclipse any savings enabled by automation.

Cost-advantage through automation
Test and measurement instruments maker Good Will Instrument (GW Instek) has made inroads into the educational, enthusiast and value-conscious markets.

Today, its products are sold in 86 countries through over 400 distributors, and are used by the US Airforce, the Chinese PLA, as well as Taiwan Rail.Most of the test instrument maker’s R&D takes place in Taiwan, where 117 engineers (or 32 percent of its local workforce) design the outer casing of its products, and develop the interface and electrical engineering inside as well.

Like most Taiwanese manufacturers, Good Will Instrument has expanded across the Taiwan strait and established operations in China in order to benefit from its cheap labour.

However, its Chinese plants are focused on high volume products, with low-volume, high value work retained in Taiwan.

In the global market, GW Instek is positioned as a value brand which provides equivalent or better-featured instruments for the budget conscious.

This price edge is maintained via a combination of relatively cheap labour, automation of processes, and keeping as much work in-house as possible.

The Taiwanese production facility is highly automated: 90 percent of the electronic guts of GW Instek machines are completed via SMT lines, while 10 percent remains through-hole and must be done by hand.

In recent years, Good Will Instrument has also automated its testing by sourcing computer-driven test equipment, which can test the electrical function of its products, 10 at a time.Selected units are also tested for resistance to humidity, temperature changes, vibration, drops and angle impacts – in all, 40 standards-related items are tested for.

In 2005, Good Will Instrument automated its warehouse system with the help of Taiwanese automation company Mirle.

Its computerised warehouse currently holds four months worth of inventory, all retrieved automatically via a control panel.

Illuminated trends
The global trend towards cloud services means that for the last few years, the Taiwanese industry has been attempting to transition from pure hardware development and manufacturing to solutions based on integrated hardware, software and services.

Government-established industry associations like the Cloud Computing Association in Taiwan are hoping to duplicate its success in semiconductors within the cloud computing space.

To do so, Taiwanese companies need to start playing in the infrastructure software, application software and service operations spaces.

In the short term, however, demand for cloud computing services means existing players like Amazon, Facebook and Google are bolstering their data centres by sourcing server hardware directly from manufacturers in Taiwan.

Taiwan currently accounts for more than 80 percent of worldwide server production, and the increased demand is having trickle-down benefits to players like Diptronics.

This is the first half of a two part article, to read Part Two of Flexibility, focus and drive: the future for manufacturing, click here.

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