Machine tools are the mother of all industries. The technological advancement of machine tools drives the industry’s development and progress. Its importance cannot be overestimated.
Taiwan’s machine tool industry got off to a good start in 2022 before the market cooled down during the year. In the first half of 2022, private-sector demand was strong as different countries reopened their economies. Manufacturing and investment activities heated up and continued with the momentum from 2021. However, international events such as the U.S.-China tech war, the pandemic, the Russia-Ukraine war, global inflation caused by rising raw materials prices, and interest rate hikes in the U.S. during the second half of the year all had adverse effects on investment and manufacturing activities.
Meanwhile, the continued depreciation of the Japanese yen narrowed the price gap between the machine tools made in Japan and the machine tools from Taiwan. As Japanese players compete directly with their Taiwanese counterparties, this imposed considerable pressure on Taiwan’s exports of machine tools. Figures from IEK Consulting indicate that the production value of machine tools in Taiwan totaled NT$136.1 billion in 2022, up 4.0% from the previous year.
Looking ahead to 2023, the outlook of the global economy is conservative, given the different black swans and gray rhinos it faces. Most international organizations such as the International Monetary Fund (IMF) have reduced the forecasts for major economies by approximately 0.5% to 0.8% from 2022. Tight monetary policies and interest rate hikes as a response to inflation will have a negative impact on investment and equipment procurement.
Industrial Technology Research Institute predicts the production value of machine tools in Taiwan will be NT$135.5 billion in 2023, largely in line with 2022. The overall economic outlook remains conservative given the uncertainties around the world. That said, the recent Taipei International Machine Tool Show (TIMTOS) received a strong flow of international orders. The initial view is that Taiwan’s machine tool industry may see a recovery once the economy stabilizes, inflation eases off and demand rebounds in the second half of 2023.
We see four major technology trends in the machine tool industry in 2023:
- Green and low carbon: The global drive for net zero emissions continues. In the pursuit of carbon neutrality, companies need to plan from the design stage and adjust products for green manufacturing. In the context of machine tools, electricity consumption design requires the modification of motors, lubrication and cooling components. This will present another wave of business opportunities.
- Prevalence of digital technology: At the forefront of this trend are digital twin, i.e., the digital representation of a physical object, workflow or system on an information platform. With digital mapping, it is possible to understand the status of the physical entity from the information platform and even control the predefined interface components in the physical entity.
- Process compounding: Multi-axis (four-axis or five-axis) and compound processing are currently the key trends for machine tools. The use of a variety of processing techniques and additive manufacturing for the continuous processing of workpieces and online measurement not only saves time spent for loading and unloading workpieces, but also avoids the deterioration of precision from moving workpieces between different machines.
- Development of integrated robot arms: Taiwan’s machine tool industry has a strong presence on the world’s stage, and hence addressing the rising global demand for machine tools with integrated robot arms has become another trend. The development direction is to incorporate robot arms into the manufacturing process to resolve the pain points of end users and boost the overall system efficiency. The pandemic effects over the past few years have accelerated the adjustment of production strategies by many companies. Companies hoping to relocate production facilities and decentralize manufacturing for localization of production will be looking to apply standardization, automation, smartness and digitalization technologies to assist them to meet cost reduction targets for logistics, imports and exports.
Flexible manufacturing has become the top reengineering priority for many companies amid the current wave of transformation. This has promoted the demand for use cases of industrial robots, and hence many leading machine tool companies in Taiwan have launched solutions that integrate machine tools and robot arms.
According to the research reports by MarketsandMarkets, the global market of industrial robots will reach US$28.9 billion in 2026. Robot development will also evolve from simple robots only capable of single motions and repetitive tasks to partially autonomous high-speed robots, assembly robots and smart cobots.
At Taipei International Machine Tool Show (TIMTOS) this year, there were noticeably more small-and-medium-sized manufacturers showcasing robot arms and smart warehousing systems to keep up with trend for automation and smart manufacturing and to address the problem of increasing labor shortages in manufacturing. This is also a key development driver for the integration of robots/arms with machine tools.
Whilst the global economy in 2023 remains susceptible to multiple uncertainties, crises also imply changes and potential business opportunities. At this juncture, Taiwan should utilize digital technology, stay nimble and adapt to market and environment changes to ensure the sustainable competitiveness of the machine tool industry.