The United States is the world's biggest yacht producer, but the Republic of China on Taiwan has outraced other nations to become the world's largest exporter of yachts to the United States.
In the five years from 1977 to 1981, Taiwan has won 33 percent of the American yacht market, earning US$268 million and replacing Canada as America's biggest yacht supplier. The exports grew so fast that they reminded some Americans of the influx of Japanese motor vehicles, but in this "luxury" market, Americans seem prepared to accept Taiwan as the "kingdom of yachts," if it can cut the waves, so to speak.
The design work of many of America's prime yacht designers have been executed on Taiwan to order. One of the American designers stated confidently: "Before long, we will be seeing Taiwan yachts in the same light as we are now seeing Honda cars." But Taiwan's yacht makers do not appreciate such links: "We hope the Americans will never think this way."
Taiwan's yacht industry, still very young, counts on a new generation of energetic and dexterous young workers for continuing development. Because too many people started yacht businesses during the burgeoning period of the industry, future development may be more rocky than many such firms expected.
In a dozen or so years, the number of island yacht makers has increased from just five or six to between 60 and 70. They are now scattered along the coasts at Keelung, Tamsui, and Taoyuan in northern Taiwan, and Pingtung and Hsiaokang in the south. The boatyards in the south usually are bigger than those in the north, but most of these businesses still belong to the minor leagues in the island's export processing. Only one fourth of the yacht makers do an annual business of more than US$11 million.
The industry sailed along smoothly six or seven years ago in the fair winds generated by economic recovery from the first oil crisis. Its growth rate doubled. Many people then put their money into the yacht industry.
These pioneers of Taiwan's yacht industry were, more or less, veterans of the island's traditional boat industry—fishing boat producers or contractors producing U.S. military boats. Some had been staff members at American yacht yards. They were soon joined by house builders and steelmakers.
When the economic wind is fair, Taiwan's mini-factories proliferate. The owner of one southern Taiwan boatyard reported, "Seven or eight of my men have hived off on their own." He shook his head, indicating his view of their ventures and, also, his impatience with such small producers, who often confuse the market with cutrate prices.
The Lienhua Yacht Corporation did not start in a small way. Its parent is a flour mill, which invested at one stroke more than US$5 million to build this yacht-making subsidiary in a location just opposite the giant China Shipbuilding Corporation in Kaohsiung. Lienhua soon became the biggest builder of small boats on the island. Unfortunately, soon after it started its business in 1979, the full effects of economic recession began to be felt. Even today, Lienhua still cannot operate at full capacity.
All told, Taiwan sold 1,200 yachts overseas last year, earning US$72 million and accounting for a mere 0.3 percent of the Republic of China's total export take. This is the reward for the sweat of the young workers, who build the boats but do not know how to steer the industry. Their "yachts" actually include both motor boats and sailing vessels, most of them measuring 30 feet to 50 feet.
The prices mostly range from NT$2 to NT$20 million (US$50,000 to US$500,000), and whether it is a comfortable motor yacht or a thrill-giving sail boat, the price is right in the overseas market.
A yacht can be considered to be much like a small house built on the water. After the fiberglass hull is molded, the carpenters, painters, and mechanics begin to do their jobs, and from bow to stern, the only machines to be seen are electric saws and drills. It is estimated that labor costs account for 25 to 30 percent of the price of a boat. Still, a handmade Taiwan boat costs only one third to two thirds the price of an American-made craft, whose major elements are mass-produced. The difference is a result of both a skilled-craftsman wage gap and lower island overhead.
But besides the lower wages, Taiwan's craftsmen seem more dexterous than most of their American counterparts. In any case, such interior decorations as teak panels give the owner more of a cause for pride in his craft than the standard fiberglass walls of a competitive U.S. make. Said Bob Cantwell, a U.S. attorney familiar with the industry, "These Taiwan workers are really skillful; they make a boat literally with their hands."
Taiwan's advantage lies in her great pool of skilled craftsmen
According to Wang Tsu-hua, manager of the yacht department of the Lienhua Industrial Corporation, the popularity of Taiwan's yachts rests on three legs—they are "less expensive, built with better workmanship, and tailor-made." In the United States, yachts come off assembly lines, so there are major problems for customers who want a change in specifications.
Practically all Taiwan-made yachts are exported—two-thirds to the United States and the remaining third to Europe and other areas, including Australia. Some customers place their orders direct with the supplier, but most others get their yachts through agents. Because the producers are often visited by foreigners, most of their salesmen have learned to speak English.
Taiwan's yacht makers have learned much from their dealings with foreign customers. In the past, they were on the passive side. Their agents abroad first contacted various yacht designers in foreign countries and purchased their design blueprints. Then, the agents bought the molds. Although a yacht maker could save a sum of several million NT dollars via provided molds, he was allowed to sell the resulting boats only to the agent who furnished him with the molds. Too often, agents threatened to take back their molds in order to bring the yacht builders to terms.
Those yacht makers who have prospered, now can afford to insist on buying both blueprints and molds from the agents and can even choose their agents. Some companies share their investment with their agents; the multiple-parties check and balance each other through complex contracts.
Although most of Taiwan's yacht makers are no longer under the control of the agents, they must count on them to gather market information and to promote sales. The Taiwan yards must rely on the "eyes and ears" of their agents to keep up with vogues, "because they are making the boats not for themselves, but for markets half a world away," commented an American designer.
A yacht maker also points out that, "Most local producers use their agents' trademarks; few of them use one of their own."
The most enterprising yacht makers are increasingly reluctant to continue hiding themselves behind their agents and are working hard to establish their own reputations. The executives of the Tachiao Shipbuilding Corporation have set an example in this respect by taking back promotion rights from its agent. Tachiao now spends NT$6 million (US$150,000) a year on advertising for its product. "We print our name on top of our advertising in big letters and place the name of our agent at the bottom in small print," says Chen Wen-yuan, president of the firm.
In the wake of a vast market, Taiwan's yacht makers still have to count on their own efforts to expand their businesses. The government, at best, can only help them to participate in the international yacht fairs.
The biggest concern of Taiwan's yacht industry is design. Almost all of the makers rely on recognized foreign designers. Some farsighted investors have urged the cultivation of top designers at home, but the industry is reluctant to go along, because they know that domestic designers will have no opportunity to steer the boats in overseas waters, so they are unlikely to become great.
True, some local yacht makers do their own designing for boats sold to less picky and choosy customers. Some firms send their blueprints to recognized consulting designers abroad for their mark of approval.
The end result of both methods is Taiwan-made yachts of great beauty and fine workmanship, produced by top notch fiberglass workers, carpenters, and other craftsmen. The nuts and bolts and major components have not been standardized.
Nevertheless, some more prudent customers like to camp in the vicinity of the boatyard to oversee the construction of their boats, watching over every detail. A British customer cautions, "If you want a boat made exactly to your specifications, you had better watch the carpenters very carefully."
Though competitors abroad do concern them, most of the Republic of China's yacht makers focus more on their own problems than on the rising competition from Korea and other countries. They reason that Korea's yacht industry started much later than Taiwan's and that Korea, accordingly, lacks experienced and competent yacht makers. "Although their wage levels are a fifth lower than ours, their total costs will continue to be higher, so they will not be serious competitors in the days to come," one local yacht maker says confidently.
Chen Wen-yuan, president of the Tachiao Shipbuilding Corporation, however, does not buy this assessment. According to his contacts with Korean makers, Korean yacht producers' facilities are larger both in investment and physical size, and they often do undercut the price offers of Taiwan makers. They are also preparing to establish their own marketing network. He cautions that they should not be taken lightly.
Most local makers have made up their minds to produce upgrade high-class yachts—faster and even more beautiful. They prefer to build bigger boats because these have a higher added value. Other makers are preparing to diversify their ranges. The makers of motor yachts are preparing also to make fishing boats. The makers of sail boats plan to include motor boats in their production range.
But none of them so far plan to apply mass production techniques to the yachts, or to use fiberglass for interior decoration as in the States. Lin Hsien-hua, president of Chienhua Shipbuilding Corporation, emphasizes: "We must continue to use wood. If we switch to fiberglass, we will not be able to compete with the U.S. makers because of the freight we have to pay on our products."
The two oil crises dealt a one-two blow to Taiwan's yacht industry. But it survived. Now, for further development, local yacht makers must break out of the status quo. Shoddy workmanship and shortsightedness can become the main barriers to this endeavor.
The neglect of quality within price-cutting competition is a common headache of Taiwan 's labor-intensive small industries; certain entrepreneurs' obsession with profit to the neglect of quality is a latent danger. As some of these makers were lured into the field solely for profit, they would strengthen the industry if they would now pull up their anchors and turn away to other, more lucrative seas. Theirs certainly is not a way to build Taiwan into a "kingdom of yachts."