Currently, 90 percent of international flights are taken on airplanes that contain components, whether in the wings, cabin or engine, from one Taiwan company: Aerospace Industrial Development Corp.
First-time visitors to AIDC’s Shalu Complex are struck by how quiet and orderly it seems. Uniformed employees can be seen half-obscured within airplane sections, eyes intently focused on their work. The scene shows how the manufacture of airplanes, a precision machined products industry, is labor intensive.
Since the products the company works on are so large, there are distinct production lines. One is devoted to making airplane body sections or components for Airbus Group planes, including the A380, the world’s largest passenger jet, and the A320, the second-best-selling jet of all time. Another line is mainly devoted to work for Boeing Co.
Meanwhile, North America’s Bombardier Inc., Sikorsky Aircraft Corp. and Bell Helicopter also have work done in Taiwan. All told, 13 aircraft manufacturers from seven nations are AIDC clients.
At 19.1 hectares, the company’s Gangshan Complex is less than half the area of the Shalu facility, but it is AIDC’s profit lifeline. This is where casing is made for the engines produced by General Electric Co., the world’s largest manufacturer of jet engines. Revenue from this site approaches NT$3 billion (US$91.7 million).
“We have received accreditation for 806 aerospace special processes, more than any other firm in Taiwan,” AIDC Chairman Anson Liao said. “These put us at the highest international level. Without them, the company could not receive orders from major international companies. Our advanced techniques in aircraft manufacture, along with systems integration skills, represent a core competitive advantage that has built up over the course of four decades.”
36 years in military, 36 different positions
Liao was originally an air force officer. After graduating from the ROC Air Force Academy, he served for 36 years in 36 different positions before retiring as a general. He spent a total of 2,800 hours in the skies. After serving as the deputy chief of the general staff at the Ministry of National Defense, he became chairman of AIDC in February 2015.
“I used to fly for the nation,” he said. “Now I’ve moved into the private sector as a corporate chairman, but I’m still constantly flying everywhere.” Since assuming the job, Liao has been scurrying about, hoping to gain a full understanding of the company’s situation as quickly as possible.
In June of 2015, he led AIDC’s delegation to the Paris Air Show. One month later, he went to Nagoya, looking for new business opportunities. He also participated in the U.S.-Taiwan Business Council in October, visiting firms such as Airbus, Boeing, GE and Honeywell International Inc.
“These days, I’m going around the world drumming up sales like any other salesman,” Liao said. His ability to adapt to new roles is largely due to his wide-ranging reading in such fields as politics, economics and management. He makes frequent references to books he has read, including such modern masterpieces as “The Age of Extremes” by the British modern historian Eric Hobsbawn and “Why Nations Fail” by the young economist Daron Acemoglu.
AIDC was formerly known as the Aero Industry Development Center. Its main responsibility had been to develop and manufacture the Indigenous Defense Fighter, which was later renamed the Ching-kuo after late ROC President Chiang Ching-kuo.
On Dec. 10, 1988, the first IDF fighter left the factory and test flights were completed May 28. These demonstrated that Taiwan possessed the skills and technology to create supersonic military aircraft. The country became the seventh to prove that it had the capacity to design and develop fighter planes on its own.
In accordance with national policies aimed at developing the aerospace industry, the center was turned into a state-owned enterprise in 1996. A further step toward full privatization was taken in 2014 with a stock listing. It set a record for an initial public offering of a formerly state-owned enterprise in Taiwan over the last decade.
Early struggles overcome
Yet, before the bright success of recent years there was a painful period of transition that is less well known. Fortunately, the company’s struggles were not in vain, and it was able to herald the emergence of a new industry in Taiwan.
Originally there had been plans for 250 Ching-kuo fighters. As a result of a complicated mix of political considerations and budgetary restraints, that number was cut to 130. Production ceased in 2000. When the last one rolled off the assembly line, AIDC faced the predicament of having no airplanes in production. Without government orders, the firm had no choice but to look for something else to do, so it shifted to contract work for civilian aircraft manufacturers.
Yet how could a military aircraft factory that had never produced for civilian aircraft expect to get contracts from Airbus and Boeing? The transition was extremely difficult. First AIDC needed to be certified by foreign aeronautical agencies. Then, lacking experience in negotiating contracts, they were badly taken advantage of. The skills and technical conceptions of staff required major improvements. All in all, one could say they ended up learning some rather expensive lessons in those years.
In order to retain engineers with the needed specialized skills, AIDC had no choice but to open multiple lines of business. Fortunately, around a decade ago, Yulon Motor Co., which was impressed with AIDC’s system integration skills, wanted to develop the Luxgen brand of cars. It awarded the company orders worth NT$200 million, and these were followed by contracts to work on circuit boards for the railway industry, including Taipei Rapid Transit Corp. and Taiwan Railways Administration under the Ministry of Transportation and Communications.
After paying a steep price for its early lessons, AIDC staff and production processes became accredited and its negotiating skills improved. In 2005 the company entered a period of high growth, and in 2014 it achieved sales of NT$24.9 billion—the highest in the history of the company. It now occupies an important place in the supply chain of the international aerospace industry.
To build airplanes, a company needs more than advanced technology; it also needs highly skilled workers. AIDC’s Civil Service and Administration Vice President N. J. Lin gives the following example: Airplanes with specially curved bodies need to be layered by hand. An airplane body with a thickness of one centimeter is built up from 19 layers as thin as cicada’s wings. The world’s two leading airplane manufacturers, Airbus and Boeing, have both complimented AIDC for its top-flight workmanship.
In addition to making a successful transition from military aircraft to civilian aircraft, AIDC has helped pull a group of its downstream suppliers—small and medium firms—into the aerospace industry, broadening their industrial horizons.
“Because of AIDC, Taiwan’s aerospace supply chain went from being quite limited and local to having much greater international visibility,” said Chang Chiung-ju, chairman of ChenFull International Co. Ltd., one link in AIDC’s supply chain. Originally a shoe factory, ChenFull was able to transform into a factory making components for planes thanks to great strides taken in raising its manufacturing quality. In recent years it has expanded into photovoltaics and semiconductor precision machining.
Such attributes as outstanding quality, timely delivery, supply flexibility, and satisfied customers are what Liao regards as basics for the aerospace industry. Cost effectiveness and an ability to meet deadlines and speed production up when necessary are two other attributes of AIDC that clients frequently praise.
Hsieh Yung-chang, chairman of Magnate Technology Co. Ltd., AIDC’s largest outsourcing partner in Taiwan, said that once a part was not delivered on time to Taiwan from a foreign materials supplier, putting them behind schedule for a GE engine order.
As well as getting ready itself, AIDC informed Magnate about the situation. The two consulted, simulating the entire production schedule and readjusting priorities. Then, when the materials arrived, the two companies worked around the clock, finishing their respective tasks without any hiccups.
“A manufacturing process that usually takes 30 days was cut in half,” Hsieh said. Thanks to a good mutual understanding and mature technical capacities, GE this year specially came to Taiwan to present an award to Magnate for being one of its top 10 global suppliers.
Taiwan aerospace’s rising value
To make flying more efficient one must delve into areas such as pushing innovations in structural design, pursuing green engine designs and raising efficiency. AIDC has made a substantial investment of NT$1.3 billion in constructing its third engine casing plant in the Gangshan industrial area of Kaohsiung City. It is expected to go into operation in 2016, at which time the Gangshan’s plant capacity will rise from 6,000 engine casings per year to 10,000 per year.
“We’re expanding to be able to meet the increased orders we’re anticipating over the next five years. They’ve already surpassed NT$120 billion,” Liao said.
The reality is that in this age of globalization, the global aerospace industry will grow at a 5 percent annually over the next 20 years. In other words, AIDC and the Taiwan aerospace industry, for which the company is a driving force, have at least 20 bright years ahead of them.
In order to improve Taiwan’s position in the international supply chain, AIDC is bringing together component suppliers to create an A-Team 4.0 for developing high-value aerospace industry processes and products.
Liao said that the aim of A-Team 4.0 is to connect the downstream and upstream parts of Taiwan’s aerospace supply chain, combining robotics, the Internet of Things, big data and so forth, so as to fast-track increases in added value and productivity.
AIDC currently has 112 suppliers, each of which can become a member of A-Team 4.0. Liao expects that the team will act like a mother hen guiding her chicks, increasing the size of the market for all.
“We are eager to join the team and cognizant of its duties to Taiwan,” Liao said. “The next step is for Taiwan to become the leader of the aerospace industry in Asia and then a serious competitor globally.” [By Qiu Li-yan / tr. by Jonathan Barnard]