Taiwan Today

The armed forces of any nation can be a challenge to equip, and the list of items needed to help Taiwan’s military operate includes everything from cleaning agents to medical bandages, from screws to plug connectors.

Large corporations such as Northrop Grumman Corp. and Raytheon Co. in the United States, as well as Chung-Shan Institute of Science and Technology in Taiwan, all of which develop and manufacture sophisticated missile technology, rocket launchers and so forth, supply the Republic of China (ROC) armed forces with hardware and related services. Meanwhile, much less headline-grabbing items such as equipment, spare parts, assorted materials and maintenance services are sold to the military by local small and medium-sized enterprises (SME).

“Our products are for both civilian and military uses, but it’s the military that will always insist on top-notch quality,” says Jim Liao (廖宥任), sales representative of Jin Kou Enterprise Co. Ltd., which designs and manufactures quick release pins made of stainless steel or carbon steel.

Jin Kou participates in the biennial Taipei Aerospace & Defense Technology Exhibition (TADTE), which is sponsored by the Ministry of National Defense (MND), the Ministry of Economic Affairs (MOEA) and the Ministry of Transportation and Communications, and organized by the Taiwan External Trade Development Council. The most recent exhibition was held in August 2013. “TADTE allows procurers in Taiwan to find out which parts and components can be sourced domestically for the military so that purchases from the US or Europe can be kept in check,” Liao explains.

Liao’s company is based in New Taipei City’s Shulin District and is the perfect example of a resourceful Taiwanese SME. Often described as the backbone of Taiwan’s economy, SMEs employ nearly 80 percent of the total work force, according to the MOEA. The company employs 12 engineers and workers who craft rather unspectacular items like the quick release pin, ball lock pin, marine quick retractable pull pin or positive locking pin using computer numerical control (CNC) machine tools. The ROC military and some of its foreign counterparts use these pins in all sorts of weapons systems, but Liao cannot go into technical detail due to the need to protect military secrets. He explains nonetheless that, as the product names might suggest, the pins allow for quick changes in the positioning of certain objects, such as the mounting of a radar system or a machine gun.

Jin Kou also supplies pins to civilian users, primarily US-based manufacturers of sound systems. “They use our pins to connect the loudspeakers in a line array,” Liao says.

Eco Equipments Inc. was another eager participant at TADTE 2013, promoting Simple Green, a compostable, non-toxic cleaning agent that can be used on the surface of precision instruments found in airplanes. The main items in Eco Equipments’ product line, however, are the oil spill control systems it designs and manufactures.

“Environmental awareness has risen markedly in recent years, and that includes the armed forces,” says Eco Equipments sales representative Julia Wu (吳秉珊). “We want to contribute to an environmentally friendly military with our products.”

Naval vessels, for example, are sometimes employed during major industrial accidents, but they may also leak or spill diesel and other toxic materials just like their civilian counterparts. For such cases, the firm manufactures oil spill containment booms, which are basically long hoses or fences that function as floating barriers and are capable of use in strong currents. The booms are designed and manufactured by two engineers and about 20 workers in Eco Equipments’ two factories in Taoyuan in northern Taiwan and Kaohsiung in the south. Besides the oil spill containment booms, which cost between US$40,000 and US$120,000 apiece, the company also produces floating skimmers that collect surface oil, high-pressure cleaners that blast oil from rocks and other hard surfaces, inflatable tents and land tanks used for the temporary storage of collected contaminants.

Jin Kou and Eco Equipments generally sell to the military, government organizations and the private sector, but Ocean Technologies Co. Ltd. (OcTec) based in Taichung, central Taiwan, targets arms makers and the aerospace industry. The firm produces machine tools such as electric discharge machining (EDM) tools, which basically use high voltage sparks to remove material from a workpiece. EDM tools are essential for the manufacturing of turbine blades used in jet engines.

“Many airplane parts are made of materials that are hard to work with, such as titanium, which ordinary drilling machines can’t possibly handle,” says Sunny Liao (廖月照), OcTec’s president. “But our EDM tools can drill jet engine cooling holes and holes in turbine blades as small as 0.1millimeter in diameter.”

Sunny Liao adds that OcTec designs and manufactures numerous EDM products, which are sold for between US$100,000 and $400,000. Apart from TADTE, the firm also promotes its products at several overseas trade shows, as well as at the biennial Taipei International Machine Tool Show, she says.

It is not as if the ROC military pushed its shopping cart along the aisles of trade fairs on the lookout for quick bargains, however. “The MND sponsors TADTE mainly to showcase the capability of the whole country’s defense industry as well as to encourage local suppliers to sell overseas; but we won’t so quickly decide which exhibitor will be awarded a contract as our supplier for million-dollar deals because that’s a long-term process, while the show only lasts a few days,” says Colonel Tsou Yi-chien (鄒怡堅), deputy director of the Material Transshipment Division under the MND’s National Procurement Office.

Annual Procurement Plans

According to Tsou, the ROC Army Logistics Command procures spare parts and minor equipment for the army, while this task is managed by a separate maintenance command in both the navy and air force. “These commands submit annual procurement requirements, with a complete procurement plan drawn up at the end of each year,” he says.

Citing the example of engine parts, Tsou says, “Most of these cases will be published on our government procurement website, so that companies wishing to supply the military with such items can participate in open competitive bidding. And the day after the deadline, we begin by comparing prices.” Additional negotiations with suppliers of parts and components that hold long-term contracts are not needed if deliveries meet contracted deadlines.

Tsou states that sampling tests are usually conducted on delivered parts and components, but more highly valued items are tested on an individual basis. “Basically, the tests differ depending on the part and its supplier,” he says.

The colonel makes it clear that mainland Chinese firms are without exception prohibited from supplying the ROC military with goods or services for security reasons. Furthermore, for all maintenance work the service provider must prove that there is no conflict with the original manufacturer’s intellectual property rights when the task is carried out.

One advantage for local SMEs that supply the armed forces is a national policy stating that prior to procurements from abroad, the ROC military must make sure “the item in question can’t be produced by a Taiwanese company, because otherwise a local firm must be chosen,” Tsou says.

However, SMEs must comply with certain regulations. For example, stringent export controls are in place, as high-quality “dual use” goods could strengthen not only the ROC military, but that of potential adversaries or the adversaries of Taiwan’s allies. Export controls for commercial transactions are enforced by the Trade Security and Export Control Task Force under the MOEA’s Bureau of Foreign Trade.

According to Shen Jyan-yi (沈建一), the task force’s deputy executive secretary, Taiwan has been using the European Union’s export control list since 2009, which in turn incorporates the Treaty on the Non-Proliferation of Nuclear Weapons, the Chemical Weapons Convention, the Biological Weapons Convention, the Wassenaar Arrangement, a multilateral arms and dual-use export control regime with 41 participating states, and all export control-related United Nations (UN) resolutions.

“Exporters seeking to ship strategic high-tech commodities [SHTC] included in that list must apply for export licenses with us,” Shen says. He explains that the SHTC list contains mostly parts and components as opposed to finished goods, and that items are listed according to particular features. For example, pumps are only controlled from a certain grade upward and machine tools only if they incorporate CNC technology.

“However, we don’t only take into consideration the actual product. We also look at whether the buyer has military ties, among other factors,” Shen says. He adds that his task force outsources technical inspections of sensitive shipments to the Industrial Technological Research Institute, a nonprofit research and development organization in Hsinchu in northern Taiwan.

At a Disadvantage

Shen notes that Taiwan’s exclusion from UN treaties on export controls puts local industries at a disadvantage in that Taiwan, as a non-UN member, is banned from trading certain chemicals that make computers heat-resistant. “We’re banned, but our competitors South Korea, mainland China and India are all able to produce these chemicals, and even Syria, which has a track record of employing chemical weapons against civilians, can do so as well,” Shen laments.

Taiwanese SMEs that develop and manufacture unmanned aerial vehicles (UAV) hope of course to place large, lucrative military orders. Carbon-Based Technology Inc., located in Taichung’s Central Taiwan Science Park, promotes its UAVs and related services under the brand name Uaver.

Uaver marketing chief Craig Wang (王純珩) says more countries have begun to commission the private sector to carry out mapping—a particularly important undertaking in many parts of rapidly developing Asia where construction can change a landscape literally overnight. Foreign buyers are increasingly interested in Uaver’s Swallow and Avian models, battery-powered fixed-wing aircraft with wingspans of 100 centimeters and 160 centimeters respectively and a communication range of 10 kilometers. One of the company’s complete UAV systems costs around US$100,000.

“Malaysia and South Korea bought several UAVs from us for mapping in 2013; Russia has paid a deposit on two that are also intended for mapping,” Wang says. He adds that Uaver is also in sales talks with the narcotics suppression bureau of a Southeast Asian country that lost a helicopter crew of five in a crash in 2013 while searching for opium plantations and amphetamine factories in the jungle.

However, UAVs and related services are also in high demand on the domestic front. According to Wang, Uaver has an open contract with the Kaohsiung City Government to check on infrastructure and remote villages, for example after typhoons, when weather conditions may still be too dangerous for manned helicopters.

Taichung-based Avix Technology Inc. is another UAV manufacturer that had a presence at TADTE 2013. The company’s principal business is the original design manufacturing of radio-controlled model helicopters for JR Propo, a major Japanese brand of radio-controlled robots and model aircraft, but Avix is now developing its first UAV helicopter, the AXH-1400, which has the potential to perform military reconnaissance as well as mapping.

According to Cooper Chang (張成榮), principal manager of Avix’s UAV program, the main advantages of this aircraft are its very high payload capacity—up to 10 kilograms—and the capability of taking off from very confined spaces, making it suitable for use on ships, for example. “Operators of high seas fishing vessels increasingly seek UAVs to find fish and have approached us. So has Japan’s national broadcaster NHK, which needs a capable helicopter UAV for its heavy, extremely high-resolution TV cameras,” Chang says. He adds that the AXH-1400 will eventually come with servos and a motor (but no data link), ground control device and an auto-pilot system at an estimated price of US$10,000, a 10th of what a UAV made by an Austrian competitor costs, according to Chang.

The various local SMEs angling for lucrative deals with the military all benefit from the immediacy of Taiwan’s industrial supply chain. EDM drilling machine tool maker OcTec, for example, has chosen Taichung as its base of operations, as the area hosts countless metalworking shops. Such shops operate machine tools that frequently require replacement of the grinding and milling parts that OcTec provides. Also benefitting from short supply chains are UAV makers Carbon-Based Technology and Avix Technology, both of which are able to manufacture most of their own requisite metal, carbon fiber and plastic parts. Parts that the companies cannot make can be sourced in the area on very short notice.

Taiwan’s SMEs not only strengthen the ROC armed forces, but the research and development done by the military also helps make local SMEs more competitive. Carbon-Based Technology is a prime example of an SME that has benefited from such technology transfers, as was the case when the firm was involved in the production of Taiwan’s indigenous F-CK-1 Ching-kuo air superiority jet fighter in the 1990s. The F-CK-1, developed by the state-owned Aerospace Industry Development Corp. (AIDC), was produced in Taiwan with American help because Washington wanted to avoid complicating US foreign policy at the time by selling its modern jet fighters directly to Taipei.

“At that time, some of the people who are now our key engineers were project assistants with AIDC, which jointly developed and built the F-CK-1 with American defense corporations,” Wang says. That experience allows AIDC to now manufacture landing gear doors and pressurized doors for Boeing 737 and Boeing 747 aircraft. Carbon-Based Technology also learned a lot during that time, and as a result there are currently highly sophisticated Taiwan-made UAVs on the market.

“And if the F-CK-1 program were to be revived, and Taiwan were producing modern jet fighters, Taiwanese SMEs would again benefit from related technology transfers, in turn giving a big boost to their competitiveness,” Wang notes. Not only can local SMEs claim credit for playing an instrumental role in Taiwan’s economic development, but they have also been crucial in maintaining national security, protecting the environment and encouraging employment.

______________________________
Jens Kastner is a freelance journalist in Taipei.

Copyright © 2014 by Jens Kastner