Quick-Tech Machinery Turns to Mitsubishi to Upgrade Tech-caliber in Lathes

Taiwan's Quick-Tech Machinery Co., Ltd. signed a strategic-alliance agreement on Feb. 1 with the Japan-based Mitsubishi Electric Corp., a world-leading supplier of a variety of electrical products, including upscale household fridges and other home appliances, to buy from the Japanese firm CNC controllers and key components.

The agreement was signed at Quick-Tech's headquarters in Tainan Technology Industrial Park, southern Taiwan by managing director K.C. Jacky Huang and Katsunari Mazaki, senior vice president and general manager of Mitsubishi Electric Taiwan Co.'s factory automation division.

The inking of the strategic alliance marks the first time for Quick-Tech to try to upgrade manufacturing techniques and after-sale services by formally working with a key-component supplier. In the past, Quick-Tech concentrated on the production of open-architecture personal computer (PC)-based CNC lathes, but it is beginning the process to develop multi-functional products, ones that can handle a wider variety of machining jobs with higher precision.

"Our existing PC-based CNC devices can easily take on multi-spindle and complex machining jobs," notes Huang. "But such PC-based CNC devices simply lack the computing power and fully meet relatively more sophisticated requirements of our German customers, who clearly demand machine tools that can do highly complex tasks. To enhance our manufacturing techniques and after-sale services, I have been thinking at length about formally cooperating with Mitsubishi, who has long been the major supplier of servo components in Taiwan's machine-tool market."

The strategic alliance calls for Quick-Tech to procure NT$100 million (US$3.1 million at US$1:NT$32.1) worth of CNC controllers and related key components from Mitsubishi Electric during the next year, with the Japanese concern to offer such high-tier products as M700-series CNC controllers, as well as the necessary manufacturing technology to enable the Taiwan-based partner to upgrade its product level.

Demand Brings About Alliance

Huang says that his company has been in a transition period, one that is born out of necessity-where the European buyers are demanding machine tools able to handle relatively more complex jobs. In other words, Quick-Tech has to devise means to upgrade its lathes to machine not merely items such as 1960s brake drums but current day brake discs of perhaps ceramic-composites. So the firm aims to concentrate on multi-stack CNC lathes requiring more powerful CNC-controllers to fully realize more sophisticated functionalities. Since last year, Quick-Tech has been procuring Mitsubishi Electric's M70-series CNC controllers to facilitate its production of multi-stack CNC lathes. Signing the strategic alliance with Mitsubishi ensures a steady supply of higher-tier CNC controllers, hence allowing Quick-Tech to meet the demand of European customers for high-tier CNC lathes.

Global Network

Mazaki notes that, with service network well-established worldwide, his company could easily and would do its best to support Quick-Tech's proposed plan to upgrade manufacturing technology to build high-tier products. He says that Mitsubishi is a world-class brand that specializes in supplying computerized controllers enabling complex machining functions in multi-stack CNC lathes, a capacity that readily lends itself to effectively helping Quick-Tech to develop higher-caliber products. Mazaki also believes the strategic alliance will create a win-win situation.

Currently, Mitsubishi targets selling servo components and CNC devices for machining centers and tapping machine tools, rather than CNC lathes, in Taiwan. "The cooperation with Quick-Tech will help us expand our presence in Taiwan's CNC lathe arena," says Mazaki. "With the inking of the cooperative agreement, we will be able to offer customized products and services to Quick-Tech, a job we are undoubtedly ready to do considering that we bring with us considerable experience in offering customized products and services to customers at home."

Mitsubishi has promised to supply M70 CNC devices so that Quick-Tech can, without problems, go full speed ahead to produce multi-spindle CNC lathes in 2008, with the Japanese supplier to provide the higher-tier M700-series products in 2009.

Quick-Tech says it saw sales grow 28% annually to reach NT$470 million (US$14.68 million) last year because of the integration of M70 CNC devices on its CNC lathes on a trial base, which has helped it to effectively land many more new orders from abroad. And the rosy picture continues to be projected on Quick-Tech's sales radar-with the Japanese partner having promised to supply the M70 CNC devices without interruption, Quick-Tech expects to achieve some NT$600 million (US$18.75 million) in annual sales this year.

Product Differentiation

Huang is almost smug when he expresses his total confidence, ever since the founding of his firm, about being able to build products different from those of rivals, a sentiment that is understandable considering that the man actually has the know-how to integrate mechanical structures with electrical control systems. His unwavering dedication towards achieving such end has fueled corporate efforts to develop uniquely-designed mechanisms for upgrading the functionalities of its CNC machine tools. In fact, the company has obtained two patents, one for an automatic tool changer and another for the power system to cut tools.

Huang says that Quick-Tech has built considerable profile in such markets as South Africa, Egypt, Norway, the United Kingdom, Germany, Peru, Brazil, Argentina and Mexico; while his company has long established footholds in South Africa, Egypt, Norway, the United Kingdom and Germany.

One of the Few

Quick-Tech boasts it is one of the few domestic manufacturers of CNC lathes that has been able to build a solid foundation in its capacity to turn out unique machine tools. However most savvy businesspeople know that the best products could lay collecting dust without effective marketing. "But we still suffer weaknesses in marketing, that's why we have to take advantage of Mitsubishi's massive global after-sale service network to offer better services to our overseas customers," says Huang.

Huang notes that his company is one of Taiwan's most seasoned manufacturers of CNC lathes as it can handle batch production, a method typically used by larger outfits to make a series of parts at one station before being moved to the next. "We don't want to engage in producing other kinds of machine tools as we have to consolidate capital to develop higher-tier CNC lathes, rather than invest excessively in production equipment to develop and build other kinds of machine tools," says Huang.

Moreover, Quick-Tech has not been left behind by the e-commerce wave-having set up a round-the-clock technical helpline on the Internet. "Five years ago, we began offering online services because our customers are spread worldwide, so being online is the most effective way to be fully service-oriented," says Huang.

Elevating Local Content

In the early days after its establishment, Quick-Tech, as most newcomers in the manufacturing sector in Taiwan without little option to do otherwise, concentrated on assembly. But as the company gradually accumulated relatively sophisticated manufacturing techniques, Quick-Tech has been, over the past decade, paying more attention to enhancing production independence-or upping the local-content rate-by developing multi-functional mechanisms used in CNC lathes. Such ambitious effort has paid off unsurprisingly-building one's own parts means less is paid to outside suppliers and hence higher profitability. Currently, Quick-Tech boasts a 60% in-house production rate.

Raising the rate of in-house production is also an effective hedge against uncontrollable factors that impact profit margins, given the fact that Quick-Tech saw profit margins grow 10% year-on-year in 2007 due to the success in raising its "local content rate." Another factor driving the firm's rising profitability lies in its efforts to increase production efficiency. "We enjoy very low staff turnover because most of our workers have accumulated ample professional experience and they are content to stay onboard-applying their specializations as the company grows," says Huang.