Innovation potential Taiwan: Precision Manufactorer Instead of Prologned Workbench

The first association with “Made in Taiwan” is even today primarily: cheap. The fact that this perception is not correct is shown by multiple studies that view Taiwan among the leaders in Asia and the world when it comes to innovation potential. Successful collaborations are also making a mark in the direction of quality.

For a European, getting his/her machines and systems produced in Taiwan in the past was like a state secret. But something is changing here now. It’s not just since the increasing economic pressure in cauldron that the Taiwanese companies are becoming conscious about investing more in quality and going offensively in the market, but even before that. MM MaschinenMarkt wanted to know on site of the branch office of a German company how the high technical requirements of the parent plant Sauter Feinmechanik can be correlated with the low-cost image. A visit to David Hsiao, who built up Sauter Asia from a sales support point to a production site.

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David, you were initially a successful sales department of German products in Asia. Why did you take the trouble of getting into production too?

After I had worked as a service engineer in Europe and USA at the beginning of my career, I wanted to concentrate on my family here in Taiwan at the end of 1980s. I founded the company GP. GP stands for Good People, Good Products or German Products – just as you like. In this phase, I took over sale and service of Sauter. However, problems were accumulating – especially in case of price and delivery times. There was need for discussion and something had to be changed.

What was the outcome of these discussions?

For quite sometime, Sauter management in Germany was already thinking of building a firm mainstay in Asia. However, China was being considered as the location initially ...

... which you could direct towards Taiwan?

Ultimately, it was a question of confidence, even for myself. As it was clear that we had to change something in order to increase the market share of Sauter in Asia, we established a Joint Venture. Initially, the idea was to produce parts in Taiwan and address both the greatest issues – delivery time and costs – simultaneously. In 2006, we established the branch office Sauter Asia and sold around 500 tool turrets in the beginning.

Which hurdles did you have to clear? How was the teamwork?

Sauter Germany gave us complete support from the very beginning. They sent experts for all areas: sales, suppliers, supply chain. Quite an important aspect here in Taiwan was, for example, going to our suppliers and making them fit to produce the parts of required quality. This took place in several steps: We produced small parts initially, then shafts, casing and gear parts that were all sent to Germany for quality assurance. This learning process lasted for more than six months. Only then did we start the assembly of tool turrets here in Taiwan.

How many suppliers do you have to coordinate with?

We have five main suppliers. That is one of the greatest advantages in Taiwanese market. We have a very high concentration of companies in and around Taichung. Here, you will find everything you need within a radius of 20 kilometres: Someone can roll, someone can mill, someone can grind. In Taiwan, it is very, very easy to build a machine – from foundry to electric equipment, we have everything.

Sounds seamless. But how do you ensure quality? You cannot change the mindset of your suppliers.

That is certainly a challenge. Three people can build a machine here resulting in a very low price and also low quality. This ruins the market. But there are also those who can produce high-quality parts. You have to find them. It mostly becomes apparent in the first conversation whether there is sincerity to attain the required quality level. We want to go to the next level in the production of parts too. That’s why we are building up our own production at present.

What were the greatest hurdles in retrospect?

The most important is that the people here should adopt the mindset of Sauter Germany. Our people often wonder why certain steps must be done in a particular manner and cannot be done in another way. We needed two to three years to adjust this. Only then we could start with actual value addition to produce quality.

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