Despite the threat posed by counterfeiters, AirTAC has earned solid reputation in the Chinese market of pneumatic components, following Japan's SMC in establishing a competitive advantage through vertical integration, gradually building its global strength. The company expects to invest roughly US$100 million by the end of 2012, dedicating high-end technology R&D in Taiwan, which will be established as the global R&D center of AirTAC International Group.
With a fruitful history of more than 20 years in China Mainland, AirTAC was listed on Taiwan Stock Exchange two year ago. Marketing with the brand ""AirTAC"", the company has become the second largest manufacturer of pneumatic components in the Greater China region, and number three worldwide. To further explore the global market, AirTAC expects to invest roughly US$100 million in Taiwan to develop a high-end technology R&D center.
The Up and Comer in the Chinese Market
Taking its first step in Taiwan in 1988, AirTAC continued to move into the market in Guangdong and Ningbo, China and in Italy. AirTAC International Group was established in 2009, listed in Taiwan in the following year. In nearly 30 years, AirTAC's gross margin has been increasing every year, obtaining 13% of the Greater China market share, which leads AirTAC to be the second largest manufacturer of pneumatics in Greater China and strive to be the No. 1. The subsidiary in Singapore is to start operation at the end of 2012. ""In addition to the steady growth in the Mainland China market, we are moving into the developing marketplace of Southeast Asia,"" said Chairman Wang Shih-Chung.
Over the past 30 years, the company has fulfilled these ambitions through hard work in Taiwan and later Mainland China. In 1985, Mr. Wang, after graduated from high school, apprenticed himself in a factory, working hard to learn everything from the bottom up. Through this extensive training, he built up his familiarity with relevant technologies. In 1988, he met Mr. Lan Hsun-cheng, who was a salesman and is now the President of AirTAC. They scraped together NT$110,000 to launch their own venture.
At the time, Taiwan's market for pneumatic components had long been occupied by Japan's SMC. Having worked in a contract foundry, Mr. Wang was well aware that he needed to break out of the status quo. At the time, products imported from abroad sold at higher prices simply because of a lack of competition in the market. Thus, since the establishment of the company, Mr. Wang and Mr. Lan have decided to create their own brand.
Proprietary Specifications, Built from Scratch
Developing a proprietary specification is essentially starting from scratch. Thus, Mr. Wang together with a R&D team
put their knowledge to work more than16 hours per day to build the products. With 8 years of hard work, AirTAC finally won
the approval and brand awareness by small and medium-sized customers. By 1995, AirTAC had already developed a certain reputation in Taiwan, but Mr. Wang was keenly aware that it would be very difficult to build an international brand relying solely on the Taiwan market. Thus, the company decided to move to the Mainland China market and expand its scope of operations. In 1998, the company established a factory in Guangzhou. Mr. Wang noted, ""AirTAC was fortunate to catch business opportunities at this stage of China's development,"" - opportunities which propelled AirTAC to great success.
At the time, Mr. Wang realized that China's pneumatic component market was a seller's market with buyers lined up with money in their hands. AirTAC broke this model by pursuing reasonable profits, winning customers with sincere service.
Aside from luck, Mr. Wang's wisdom to deal with counterfeit AirTAC products was of great importance. Given the prevalence of counterfeit products in China, rather than fight against the counterfeiters, Mr. Wang taught them correct production processes, deciding that they should team up against a common enemy. From the start, AirTAC followed its own path, uncontrolled by others. AirTAC's products differed from those of SMC, but SMC dominated the Mainland China market. To successfully break through SMC's control and solve the counterfeiting problem at the same time, Mr. Wang taught the counterfeiters to copy AirTAC's products. This rapidly increased the exposure and visibility of AirTAC product specifications, leading to acceptance and approval of AirTAC products in the Mainland China market.
Despite the assistance it provided to the counterfeiters, AirTAC only shared a small part of its know-how, keeping 90% of the processes secret and thus never put the counterfeiters in a position to actually threaten the company, thus ensuring the company's long-term results. Mr. Wang said, ""It's like I taught them to make a lighter, but the customers still come to me to buy their cigarettes."" Once, on a flight, he read a magazine article reporting that, despite China being the largest counterfeiter of Microsoft products, China was also the most profitable market for Microsoft. This inspired Mr. Wang to take a counter-intuitive and risky approach, creating his own specifications to make AirTAC the global leader in manufacturing of pneumatic components.
Vertical Integration Secures Costs
Now, Mr. Wang isn't troubled by reports of counterfeit products in the market. Instead, he puts his efforts into ensuring that AirTAC's genuine products are clearly and visibly superior in quality to the knock-offs. He said, when there are more fakes than genuine articles on the market, ""our customers want to buy authentic AirTAC products. Once they know how to recognize genuine AirTAC products, they'll avoid the counterfeits.""
Mr. Wang constantly keeps an eye on the horizon. While SMC is AirTAC's biggest rival, Mr. Wang also sees SMC as being worthy of respect and study. ""SMC has over 50 years experience, as opposed to 25 for AirTAC. If AirTAC is able to become as formidable as SMC after 25 years, it will be a remarkable achievement. AirTAC currently commands about only 1.5% of the global market. With our imminent entry into Southeast Asia, and then our future worldwide expansion, we will naturally take the market leader, SMC, as our model.""
However, this approach alone is insufficient. To ensure the quality and efficiency of raw material supplies, during the company's first ten years of struggle in the Mainland China market, Mr. Wang constantly worked on the vertical integration from raw materials to sales, to eliminate risks from raw material price fluctuations, firmly grasp cost advantages, build a dense and complete marketing network, and pull AirTAC ahead of its competitors. Finally, in 2009, the company registered the AirTAC International Group in the Cayman Islands.
Mr. Wang believes t hat , despite the saturation of the Chinese market, AirTAC's longer m specialization in product specific R&D and manufacturing gives the company great hope for the development of new products. Therefore, the advantages derives from its vertical integration will give AirTAC additional strength in its global expansion.
With Taiwan, AirTAC Has Become a Player on the World Stage
AirTAC stands on the verge of mounting the global stage, faced with opportunities in untapped markets. Yet the company has declined to appoint agents for AirTAC products. Mr. Wang explains, ""AirTAC may be disappointed by people, but people will never be disappointed by AirTAC. When you enter a new market, you have to rescind previously-granted agency rights, which is bound to damage relations with those agencies."" Therefore, he prefers to take a gradual and incremental approach with his sights set on the company's long term success.
It's worth mentioning that Mr. Wang attaches great importance to corporate culture, stressing that internal humanity is necessary for the development of core values, and that material greed results in spiritual emptiness. Therefore Ai rTAC not only regularly organizes many charitable activities, but also contributes heavily to disaster relief efforts. Mr. Wang said, ""When our staff are out of the office, they're on the scene and can see how fortunate they are compared to so many others, and this understanding adds to the strength of the company.""
These internal demands are manifested in outward appearance, which can be seen in the company's new building at No. 23 Ziyou Street in the Tucheng section of Taipei. This building currently serves as AirTAC's Taiwan operations headquarters, and presents a clean and fresh facade. The interior presents a scene of exquisite luxury with crystal light fixtures and marble decorations, creating a bright and spacious workplace with touches of Mr. Wang's ingenuity appearing everywhere including eyecatching charcoal columns. Mr. Wang said, ""I don't understand design, but I remember to never waste money on needless extravagance. This is the only way to serve our investors well."" From here, the AirTAC plan will launch at the end of the year to strengthen the company's investment in Taiwan, making Taiwan the foundation for the company's shining performance on the world stage.
Source： Department of Investment Promotion, MOEA
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