Chairman Paul Chen of the Taiwan Magnesium Association (TMA) is optimistic about Taiwan's magnesium industry, forecasting that the island could join industrially advanced economies at the forefront of global competition.

Chen, chairman and CEO of Gatetech Technology Inc., was elected the first chairman of the association last year. The association now has around 100 member organizations, including the government-backed Materials Research Laboratories of the Industrial Technology Research Institute (ITRI), Metal Industries Research and Development Center, and Taiwan Bicycle Industry R&D Center.

Chen believes that the gap between the world leaders and Taiwan in the magnesium industry is not as wide as that in other metal industries, such as steel and aluminum. "Other countries have over 100 years of experience in the steel and aluminum sectors. But the magnesium sector is still in its infancy, and producers in the leading countries are still struggling to overcome the same technical bottlenecks our firms face," he says.

Tech Metal of Choice

Magnesium is becoming the metal of choice in modern manufacturing due to its lightness (weighing only about one-third as much as aluminum), excellent shock absorption and electro magnetic interference (EMI) insulation, recyclability, and abundant supply. It is currently used in cars and tools, and since 1998 it has become a commonly used material in notebook-computer cases.

Magnesium cases for 3C (computers, communications, and consumer electronics) devices have become a major source of revenue for Taiwan's magnesium manufacturers. In addition, several manufacturers in Taiwan now produce magnesium car parts and tools. ITRI's Industrial Economics & Knowledge Center (IEK) estimates that in 2003 Taiwan's magnesium industry generated revenue of approximately US$6.4 billion, up 40% from 2002.

Chen estimates that Taiwan will import 12,000 metric tons of magnesium ingot in 2004, up sharply from last year's 9,000 metric tons and 2002's 4,000 metric tons.

Taiwan, Chen says, has many advantages in the magnesium sector, including its high-quality manufacturing and low production costs vis-à-vis the West and Japan. "Cases for 3C equipment, for example, are the most difficult items in this area to make because they must have a shiny surface. That's a big challenge for manufacturers. Fortunately, most of our manufacturers have overcome this challenge to become major contract suppliers of heavyweight multinationals. Based on their success in the 3C sector, they should be able to expand into other application markets without much problem," Chen says.

An IEK study reveals that around half of the world's notebook computers were equipped with magnesium cases last year, an increase from the 25% share registered in 2002, when a total of 30 million notebook computers were shipped worldwide. The study also shows that 16% of the world's 415 million mobile phones sold last year had magnesium cases, an increase from the 11% or so share posted the year before. Around five million digital cameras shipped last year featured magnesium cases, up from two or three million units in 2002.

Over the past three years, strong demand for magnesium parts from 3C industries has inspired Taiwanese manufacturers to spend some NT$20 billion (US$590 million at US$1:NT$34) on expansions, according to the IEK. Currently, the island's 30-some magnesium-product manufacturers focusing on extrusion processing have installed over 220 new machines, making domestic capacity second only to that of Japan in Asia.

Another major boost for Taiwan's magnesium industry has come from the government, which has recently granted a five-year tax holiday to producers.

Too Much of a Good Thing?

Yet while the 3C sector is proving to be a mother lode for magnesium-product manufacturers in Taiwan, the massive new investment that has followed could result in a supply glut, warns Chen. "Part of my association's mission over the near future is to steer part of the domestic magnesium-product capacity to non-3C industries, such as tools and auto/machinery parts," he says.

Chen's concern is shared by Jerry Ou, deputy director general of the Industrial Development Bureau (IDB) under the Ministry of Economics Affairs (MOEA). At the TMA's inaugural ceremony last year, he said that the local magnesium industry should shift attention to non-3C applications, such as auto parts, power-tool parts, and bicycle parts, to prevent excessive competition.

IEK analyst S.F. Tsai sees a bright outlook for magnesium parts in the automobile market. He predicts that some European car models will have at least 172 kilograms of magnesium parts within 10 years.

Diversification into non-3C applications can also help domestic magnesium manufacturers reduce their labor costs. "Polishing the surfaces of 3C parts, especially cases, is very labor-intensive work as most of these parts require a mirror-like appearance," he says. Such labor-intensive work can be eliminated in other applications. Chen plans to organize association members to attend more international metal shows featuring non-3C parts with the hope of tapping new business opportunities.

Another thing Chen wishes to accomplish in his three-year term is to help the domestic industry develop a reclamation system to collect waste materials for recycling during the production process. He points out that as much as 75% of the materials used in making a magnesium 3C part is wasted during processing, while wastage on hand-tool production ranges from 40% to 50%. Currently, 3C parts alone account for around 40% of Taiwan's total output of magnesium parts a year.

Like Chen's company, most of Taiwan's leading magnesium parts manufacturers handle coating and polishing operations in-house. In the west and Japan, the industry has dedicated polishing and coating service providers, Chen says. "We don't have dedicated polishing and coating providers because the equipment is quite costly and the processing methodology is quite different from those used by coating and polishing factories in other industries. So, no polishing and coating manufacturers in other industries are willing to invest in the equipment," he explains.

In recent years, many Taiwanese magnesium parts manufacturers have moved to mainland China, and many mainland producers have jumped into the industry as well. But unlike many other old-economy industries on the two sides of the Taiwan Strait, there is much room for cooperation instead of direct competition between the two sides, says Chen. "Mainland manufacturers have mostly focused on material development whereas Taiwan's manufacturers excel in application development," he notes.

While Chen has high hopes for Taiwan's magnesium industry, he concedes that the local sector will need to overcome the current talent shortage. "Most graduates go into the electronics industry. So, I always suggest that our members representing academic institutions should encourage their students to get involved in this industry by impressing them of the fact that magnesium is an industry of the future," Chen says.