Special Feature >>社論 : 全球化已死？碳稅時代？
「扣件商業生態系」戰略刻不容緩Editorial-End of Globalization?
Carbon Tax Era?
Time is of the Essence for“Fastener Business
Ecology Tactic”

Hardware & Fastener Components - no.60/2023

From Donald Trump’s to Joe Biden’s
regime, the world enters the era ofintense upheaval. We are past the former
trade friction between the U.S. and China,
the pandemic, and now we arrive at therepercussions of the Russian-Ukrainianwar, inflation and US-China tech race. Thepast three years are pivotal in mankind
history. That is when Hermann Simon,a professor born in Germany whocoined the term Hidden Champions,published Hidden Champions: Ascent andTransformation— the latest update of
his first work. In his updated discourse,
he brought up the significance of Taiwan
as a resilient nation being a hidden
champion. This book devote s t wo
chapters to analyzing Taiwanese hidden
champions, showing the importance
he attaches to Taiwan’s position on theworld stage.
He mentioned Taiwan is highly similar
to Germany in terms of hidden champions
and industrial structure. Germany tops
the world with a number as many as 1,573
hidden champions. Taiwan ranks 8th with
105 hidden champions, above China at the9 th place with 97 hidden champions. The
German hidden champions are nationwide, while in Taiwan, hidden champions
exist in multiple industries. Taiwanese
fastener industry alone has quite a numberof potential hidden champions. Read along
as we invite you to look into the present
and future of Taiwanese hidden fastenerchampions in reference of Hermann'sperspective.

058 惠達雜誌

Taiwan Has a Strong Economic Engine
According to Hermann’s research, the top 3 nations with the highest total export
values during 2010 and 2019 are China (USD 20.9 trillion), the U.S. (USD 15.4 trillion)
and Germany (USD 13.9 trillion). Taiwan comes in 10th with a total export value of USD
3.1 trillion which puts Taiwan’s export momentum in the world’s top 10 ranking. It
is even more shocking if we look at the export value per capita, where Taiwan comes insecond right after Germany. Based on the statistical data rounded up by Fastener World,
Taiwan exported USD 38.727 billion worth of fasteners from 2010 to 2019 (Figure1). It accounted for 1.2% of Taiwan’s total export value in the same time range,
contributing to a considerable extent to Taiwan's total export value.

Definition of a Hidden Champion
The three requirements that Hermann sets on a hidden champion are:1.

Ranked among the world’s top 3 in its market category, or ranked 1st on thecontinent where the champion is located.

2.

Revenues below 5 billion euros. (Significantly raised from 900 million euros set
in his first book.)3.

Low popularity among the general public.

The top three nations in terms of the number of hidden champions identified byHerman are Germany (1,573), the U.S. (350) and Japan (283). Here, Taiwan comes in 8thwith 105 and China coming in 9th with 97 identified by Hermann. According to White
Paper on Small and Medium Enterprises (SMEs) in Taiwan, 2022, Taiwan had over1.59 million SMEs in 2021, accounting for more than 98% of all enterprises. Amongthem, Taiwan’s Ministry of Economic Affairs (MOEA) identified 76 hidden champions.
However, by Hermann’s definition, the number of potential hidden champions could
go beyond the number disclosed by MOEA. Right in Taiwan’s fastener industry
there are multiple enterprises with the potential, including Tong Hwei Enterprise(stainless steel fasteners), Jinn Her Enterprise (hexagon bolts), Fang Sheng
Screw (hexagon socket screws), QST International (automotive fasteners), Ying
Ming Industry (high-strength fasteners), Sheh Kai Precision and Sheh Fung
Screws (small construction screws), Bi-Mirth (wood screws), Kwantex Research(wood screws), Jern Yao Enterprises (forming machines) and other dozens of iconic
enterprises that I can’t all fit into this article.

3,500,000,000
3,000,000,000

2010

2011

2014

2015

2016

2017

Hardware & Fastener Components - no.60/2023

Hermann analyzed and characterized hidden champions into thefollowing features:
1.

80% of them are innovators. Product innovation and process
innovation each accounts for half of their business. A corporate
culture that encourages innovation, motivating employees to be
more committed to innovation and patent applications than othercompanies do.

2.

Low annual employee turnover rate at only 2.7%, with highlevels of employee loyalty and satisfaction. Hidden champions
do their best to avoid layoffs, which helps gaining internationalrecognition.

3.

Putting focus on education and training.

4.

Growing persistently but not abruptly or irregularly.

5.

The factors driving their growth are globalization, innovation,
product pipeline expansion, deepening of value chain, and serviceexpansion.

6.

High survival rate.

7.

Ambitious and fervent corporate leaders. To them, it’s either
coming out on top or not starting it at all.

8.

Dedication to a specific field. All they think about is productivity.
Stable increase in productivity to reduce labor costs per unit.

9.

They think globally. Take RATIONAL®, this world leader incommercial kitchen appliance uses 59 languages to spread
corporate news.

10. Their market leadership and market shares are earned withexcellent performance, not with price-cutting.
Taiwan has quite a number of fastener and related companies
with part of the qualities of a hidden champion. One example is BiMirth throwing a large annual budget in innovative R&D, rollingout patent products, renewing certificates that are acquired
overseas, and collaborating with Metal Industries Research &Development Centre as well as Industrial Technology ResearchInstitute to enhance metal processing technology. Other than that,
Taiwan's fastener industry had its fair share of troubles fromdomestic price-cutting wars in its early days, and now the majority
consensus is to stake on optimized production lines and elevatedtechnology to increase profitability and curb low-price competition.

060 惠達雜誌

2018

2019

3,969,114,428

4,316,380,032

4,090,303,303

3,610,883,236

2013

3,880,596,255

2012

4,048,948,068

3,679,741,858

4,000,000,000

3,586,618,369

4,500,000,000

3,808,037,696

5,000,000,000

3,066,814,297

Global Export Value in USD

5,500,000,000

4,638,685,129

6,000,000,000

2020

2021

6,128,854,810

Fig. 1. Taiwan's Global Fastener Export Value from 2010 and Onwards

5,319,398,407

Special Feature >>2022 Year

The Challenges for Hidden Champions
Last December, former TSMC president Morris Changdeclared globalization is dead when he was speaking in
a “tool-in ceremony” at Taiwan TSMC’s Arizona plant.
According to Hermann’s research, in fact, globalization cameto a standstill as early as 2010 in the wake of the Financial
Crisis. "This development began long before the presidencyof Trump, the BREXIT, increased trade sanctions, andthe COVID-incurred disruption of global supply chain.
Globalization was following a rocky path," said Hermann.
One of the challenges for hidden champions is the death
sentence on globalization. Hidden champions need free global
trade to reach their full potential, and therefore Herman
calls out to the world that we need to prop up globalization.
However, it is clear that the current international geopoliticaland economic landscape has turned global trade into
something as “allowing overseas businesses to move acrossborders to homeland only on condition that such exchanges
do not harm current or future national security, technologicalsupremacy and economic leadership” termed by Morris, who
continued, “But can this still be considered globalization?
Globalization is over and time is up for free trade!”
To that, Hermann put a reminder in his latest
book stating that the environment, climate, energy
consumption, consumer attitudes, trade frictions, andpolitical tensions may also create new barriers to thegrowth of hidden champions. He estimates that 1% ofhidden champions will be disqualified each year, yet hesees a grand future—digitization, ESG, carbon reduction,and business ecology— that could get them off the hook.
I figure fastener readers now coming across these words may
be thinking of CBAM in a trial run from this October.

Tactical Thinking on the Fastener
Industry
Sustainability and carbon reduction will be corporates’
ticket into the future international market. The big players are
already on it, and that doesn’t spare the small and medium
ones as well as hidden champions. The EU has fired thefirst shot going in on carbon border tax. Will other countries

Special Feature >>follow suit to make up for their own financial
gaps? No matter how this turns out, it's only amatter of time before the carbon tax era sets in.
Ca rbon reduct ion is pa r t of ESG
metrics, and therefore sustainability is oneof the areas in which Hermann sees great
opportunity for hidden champions. He points
out that sustainability is mostly hinged on theupstream value chain, raw material sourcing,
manufacturing processes, logistics, and thedownstream value chain such as recycling,
remanufacturing and circular economy also havea significant impact. Each and every process inthese two areas is where he believes the hidden
champions can bring out their expertise. What
does this mean from the fastener industry
perspective?

Hardware & Fastener Components - no.60/2023

The fastener manufacturing process can becoarsely divided into wire rod processing, head
forming, secondary machining, thread rolling,heat treatment, surface treatment, optical sorting,packaging and warehousing, logistics, and it canbe broken down into many more processes. Eachprocess has the opportunity to be optimized andreduce carbon emission by introducing digitaltechnology. For example, Best Quality Wire
invented the "Auto Sludge Discharging &Oil Recycling Machine" which separates oil
and water sludge from production lines.
Their next step is to focus on revolutionary
optimization of wire rod manufacturing
process by developing a production linethat integrates wire drawing, pickling,roughening, finishing, and phosphoricacid coating into a single process. This ina nutshell is process optimization. And if
you can even go the extra length to reducecarbon emissions and transportation costsin the logistics process for yourself and youroverseas clients, this is what will become anew opportunity in the future.
Of course, we've also heard voices sayingthat sustainability upgrade and carbon reduction
are costly and resource intensive. It means weneed to be more efficient and systematic thanever before to meet the challenge. That's why
Hermann's concept of "business ecology"
could be a way out for the hidden champions
and even other fastener companies. To put it
into perspective, TSMC has its own huge supply
chain that forms a great wall. Suppliers inside thewall follow TSMC on continuous improvementof technology and corporate value. Competitors
outside the wall can hardly penetrate or destroy
this supply chain. It is what a highly resilientbusiness ecology is.
On a broader perspective, what if Taiwan's
hidden fastener champion is not limited toa single fastener company? What if it canbe the entire Taiwanese fastener industry?
Even if a Taiwanese fastener company

062 惠達雜誌

is not a hidden champion just yet, what if it can hop on the trend and jointly
contribute to the hidden champion industry? According to Hermann's definition,
an hidden champion's revenue must be less than 5 billion euros. In 2020, Taiwan'sfastener industry made a production value of NTD130.9 billion and an export valueof NTD121.8 billion, both of which in euro currency meet the definition of a hidden
champion in terms of revenue. Furthermore, Taiwan has the most complete fastenersupply chain in the world, which meets his first definition of hidden champions. Asmall island nation as it is, Taiwan has just gained a lot of media attention on
the world stage in recent years due to international political and economicfactors. This is the right time for Taiwan fastener industry to promote itself
globally while setting out to be a hidden champion.
This tactic must mobilize all stakeholders, including the government andassociations, to build the Taiwan fastener supply chain into Taiwan FastenerBusiness Ecology. The existing fastener supply chain in Taiwan is a different conceptfrom Business Ecology mentioned here. The former is a vertical industry chain, withits own fastener and related enterprises; the latter also includes a horizontal industry
chain, with key external industry players that can bring transformational power to thefastener industry, including AI technology, energy-saving technology, smart solution
providers, and other providers that you and I don’t know now, but they may have
revolutionary technologies to help optimize fastener production lines.
This is where fastener associations play the key role as a coordinator. Recently,
Taiwan Industrial Fasteners Institute along with Taiwan Fastener Trading Association
have been inviting experts to open courses to instruct fastener manufacturers oncarbon reduction, an important step in establishing business ecology. We expect theassociations to continue to play the role of a bridge to establish contacts from key
external industries and introduce high-potential technologies from outside into thefastener industry, thereby accelerating process optimization. In addition, the Taiwanese
government has provided subsidies to assist in the transformation, but these measures
may not be fast enough. We need the associations and the government to communicate,and beyond the co-assisting Taiwanese fastener supply chain, they need tocollaborate with the outside world on technology exchange and funding.
The best long going tactic for Taiwan is deployment from the perspective offastener business ecology.
Lasty, I would like to share with you and conclude with a quote from William
Liao, president of Fastener World Magazine.

The economy is in a temporary downtrend in recent years. We are very
grateful to the government and fastener associations for their support andconcern that have enabled us to express the industr y’s dilemma to thegovernment, but in the end, we have to count on ourselves to survive. I recall
a few years ago when I went with a group to a golf course in a southern Japancountryside to play golf. The course used be surrounded by factories and had
its heyday, but went down with Japan’s 30-year stagnant economy. Now thosefactories have relocated overseas and the younger population have left theirhometown. The golf course is left withering away. I found the youngest staff ofthe course in their fifties, and others in their eighties still in service. Now thegolfers are mostly middle-aged or senior. The young and middle-aged people
are mostly out of hometown working and only occasionally return from all overJapan or other countries to this course to play on holidays. That’s why business iswaning for this golf course. Plus, their equipment is a bit old.
In all fairness, excluding the high-tech industry, Taiwan fastener industry
can count as one of the world's top hidden champions, but with major technology
parks completed and now in mass production in southern Taiwan, Taiwan
fastener industry will be confronted with the issue of talents being drawn to hightech enterprises, let alone higher green power price and labor costs. Are Taiwan
fastener owners truly ready for unmanned manufacturing and an aged population
turning up in about 10 years? This’ll be for them to answer and act on.

Copyright owned by Fastener World / Article by Dean Tseng