According to the Chinese-language Commercial Times, the global population of golf enthusiasts numbers some 60 million, mostly distributed in Europe, Japan and North America. In the United States alone there are more than 30 million golfers, with 17,000 golf courses to play. In Japan, between 15 million and 18 million people play the game. Even China is racing to catch up, and is now home to an estimated 140,000 golfers and 200 courses, with between 500 and 1,000 new courses under planning.
Though geographically a much smaller country with a lower population, Taiwan is home to an estimated 200,000 golfers, according to a 2003 news report, meaning that locally based equipment manufacturing operations enjoy a fair sized domestic market as well as a piece of the global pie.
American brands claim between half and 60 percent of the global market for golf clubs, while Japanese names enjoy around 20 percent, according to the Chinese-language Career magazine. The U.S. makers are well known, and include top brands such as Callaway, the world's No. 1 name with 25-percent market share; TaylorMade, the No. 2 brand; and Fortune Brands Inc., which became No. 3 through the merger of Cobra and Titleist. These are followed by Ping, an Arizona-based manufacturer that fills the No. 4 spot, and up-and-comer Nike, which scored big when it hired Woods as a spokesman for its line of golf products, which includes such brand names as Dunlop, Maruman, Bridgestone, Tsuruya and Mizuno.
A whopping 45 million golf club heads are sold worldwide every year, according to the Commercial Times report, worth a global market value of between US$5.5 billion and US$7.0 billion. Of these, three-quarters are manufactured under the auspices of Taiwanese companies, mostly through original-equipment manufacturing or original-design manufacturing contracts.
As long ago as 1990, golf clubs made by Taiwanese companies had a market value estimated at US$345 million, according to the Chinese-language Economic Daily News. The market was so hot that a slew of companies got in on the action, only to produce an oversupply of equipment and flood the market. This led to a series of mergers, bankruptcies and closures, stabilizing the market and forcing many of the island's manufacturers to move their factories to China and other countries where they could lower their production costs.
To outsiders, it may not seem very difficult to make golf club heads, but in fact there is a lot involved. It takes an understanding of the necessary technical requirements, from mold production to wax injection, dip coating, casting and, last but not least, the all-important polishing. As a result of the complicated production requirements and slim profit margin, many of the island's big manufacturers shun the industry in favor of other sectors, not the least of which is the high-tech industry. Smaller factories, meanwhile, are generally incapable of breaking through the technology barrier.
As a result, there are currently only four main Taiwanese manufacturers of golf club heads that remain: Fu Sheng Industrial Co. Ltd., O-TA Precision Industry Co. Ltd., Advanced International Multitech Co. Ltd. and Dynamic Precision Industry Corp. Together, they are behind the production of an estimated 60 percent of the golf club heads sold in the world, according to the Economic Daily News.
In the past few years, Taiwanese OEM and ODM contract manufacturers have been actively improving the material, designs and technology they use. They tried different materials, such as stainless steel, titanium alloy and carbon fiber, and different production methods, such as casting and forging and a combination thereof.
Generally speaking, OEM and ODM firms in every sector tend to compete with each other by waging price wars or by eating up rivals via hostile takeovers. The big four golf club ODM manufacturers, however, found it was in their best interest to avoid such unsavory business practices and work together to set prices in order to maintain a basic level of profitability for each, according to an O-TA spokesman.
Established in 1953 as a manufacturer of industrial compressors, Fu Sheng began making golf club heads in 1978 when it launched a new sporting goods division. "Innovation is our lifeblood," said founder Lee Hou-teng. The company operates five manufacturing plants in countries such as China and Vietnam, equipped with the latest technology and equipment. It employs 300 engineers in its R&D division and invests 3 percent of annual sales revenues in new product research. Last year, it was the world leader in golf club heads, selling 15 million units to vendors worldwide. This represents a third of the market share and a gross profit of US$163 million, said a company spokesman.
"It's exactly our innovative capability that resulted in the high profit in this traditional industry," noted Lee. In 1995, for example, Fu Sheng started to work on using a new technology to forge titanium alloy into golf club heads, despite the high cost of the raw material compared to stainless steel. The new, space-age material was welcomed enthusiastically by golfers and is now a mainstream item owing to its strength and light weight.
Fu Sheng gained a competitor when a friend of Lee's went and started up his own golf club manufacturing operation. In 1988, Lee Kong-wun founded O-TA Precision Industry and began taking contracts from international vendors. "To us, golf is not merely a manufacturing sector but a manufacturing service sector, that still emphasizes a customer-oriented culture," said Lee.
The company said it sold roughly 5 million golf club heads last year for about an 11-percent share of the global market. The company projects an increase to 8.5 million this year. The two companies enjoy an amicable competitive relationship, and the two Lees occasionally meet to discuss how to expand their market or deal with the growing number of Chinese competitors.
In view of the extremely high percentage of manufacturing that follows the OEM and ODM models, Advanced International Multitech President Bernard Cheng said in a May 31 report from the Central News Agency that "small firms might continuously withdraw from the market, and bigger enterprises tend to seek merger opportunities as a means of extending their business strength."
"I estimate Chinese firms will catch up with Taiwanese firms within five years, so it's only a matter of time for the latter to begin seeing mergers," Cheng predicted. Established in 1987, Advanced International Multitech broadened its business model by beginning to manufacture such diverse products as golf club heads, composite materials, carbon-fiber components and bicycle accessories. It marketed around 6.9 million units of golf club heads last year, worth an estimated 15-percent of global market share, according to the company.
According to analyst Shih Wun-bing from Yuanta Core Pacific Securities, those manufacturing golf club heads in the world fall into two major areas: North America and Mexico versus Taiwan and China. North America and Taiwan are usually in charge of product design and order-taking, while Mexico and China are responsible for the manufacturing process. This division results from the front-end manufacturing requirement for precise and accurate casting technology, while low-end producers, which need intensive labor, prioritize lower labor costs, said Shih in a May 16 report.
The world's largest supplier of golf club heads, Taiwanese companies continue to come up with new designs and new products. On the one hand, new heads made with the latest technology can help a player improve his game and reduce the risk of injury. On the other hand, new designs that come out every year tend to be a scapegoat for the players who insist that they missed that last shot because of their equipment. Nevertheless, big international brands will doubtless continue to aggressively promote new products every year in order to meet the increasing demands of end users, and Taiwanese companies will continue to be at the forefront of this movement.