China's Machine Tool Industry: Market Trends and ...

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Introduction

A large amount of metal cutting machine tools are exported overseas despite their large size, weight, and high cost of transport. Furthermore, much of these exports are destined for countries which themselves produce metal cutting machine tools. This article looks at imports and exports of metal cutting machine tools to determine which country’s technology is valued the most. The competitive relationship between Germany and Japan, the two countries which dominate export markets, is also considered. The findings of this article are generated from the following interactive charts.

1. Metal cutting machine tool production (top eleven countries)
2. Imports and exports by machine type (top eleven producing countries)
3. Imports between Germany and Japan

Please refer to the interactive version of this article if you wish to manipulate the charts yourself or have difficulty viewing some of the images with small type. 

Types of Metal Cutting Machine Tools

The machine tool sector is a major contributor of technical innovation, productivity improvement, and economic growth in industries such as automotive, engineering, aerospace, and electronics. Metal cutting machine tools account for approximately 75 percent of global machine tool production. They are used to remove excess material from a workpiece by cutting or grinding. Examples of metal cutting machine tools are machining centers, lathes, drilling machines, grinding machines, and gear cutting machines. Special purpose machinery such as laser machines, ion beam machines, ultrasonic machines, electrical discharge machines (EDM), and 3D printers for additive manufacturing, are also usually categorized as metal cutting machine tools.

In contrast, the remaining 25 percent of global machine tool production is accounted for by metal forming and processing machinery which stamp, roll, or bend sheet metal into a finished shape. Examples of this type of machinery are mechanical presses, hydraulic presses, shearing machines, and bending machines.

Methodology and Scope

Table 1 shows the Harmonized System (HS) product codes [1] for the six categories of metal cutting machine tools included in this article. The years covered are 2010 to 2020. The average annual US dollar rate is used for comparison. The countries included are China (CHN), Japan (JPN), Germany (DEU), Korea (KOR), Italy (ITA), USA (USA), Taiwan (TWN), Switzerland (CHE), Austria (AUT), Spain (ESP), and India (IND) [2], which were the top eleven machine tool producers as of 2020.

The base data is machine tool production statistics published by the German Machine Tool Builders’ Association in its annual Market Report. A ratio representing the share of metal cutting machine tools in the total is applied to derive metal cutting machine tool production data. The ratio is calculated from the most relevant statistics available, including government production surveys, order information, and trade figures.

Metal Cutting Machine Tool Production Trends

While consumers of metal cutting machine tools are scattered around the globe, production is concentrated in three countries—China, Japan and Germany. Combined these countries account for approximately 61 percent of global production. A second group of five countries—Korea, Italy, USA, Taiwan and Switzerland, account for approximately 29 percent, and a third group of countries—Austria, Spain and India, account for approximately 4 percent, meaning the top eleven countries account for almost 94 percent of metal cutting machine tool production. Production for Group One is shown as a line graph in Chart 1, Group Two in Chart 2, and Group Three in Chart 3. Click any of these images to jump to the interactive chart.

China is by far the leading producer of metal cutting machine tools. However, most of its production is consumed domestically and a large proportion of its production is lower-end equipment. Foreign companies also produce in China, servicing the local requirements of foreign manufacturers. However, China’s growth in machine tool demand is slowing with foreign manufacturers starting to shift production facilities to ASEAN countries where labor is less expensive.

Overall production levels in Japan and Germany are approximately the same and both countries export the majority of their machine tool production. For example, in 2020 Germany exported 71.5 percent of its production and Japan 61.9 percent. However, in the same year Germany imported metal cutting machine tools equivalent to 21.7 percent of its production, while Japan only imported 6.5 percent.

The machine tool industry is subject to sharp swings in domestic and overseas demand caused by changes in economic outlook, currency movements, and geopolitical conflicts. However, there is rarely any change in market shares due to barriers to entry such as technology and long-standing customer relationships. An exception is India, which while still small in scale, has the potential to advance to the second group with development of its automotive and electronics industries.

Metal Cutting Machine Tool Export Trends

Chart 4 shows machining center imports and exports in 2012 and Chart 5 shows lathe imports and exports for the same year. 2012 is the historic peak of Japanese machining center and lathe exports. Click either of these images to jump to the interactive chart. The interactive chart reveals the dominance of Japanese and German metal cutting machine tool exports. Germany is the largest exporter of metal cutting machine tools, occupying the number one or two position in exports of all types of machinery, while Japan is overwhelmingly dominant in several categories of equipment.

Some metal cutting machine tool export trends apparent from the interactive chart are as follows.

Machining Centers (8457)

• Japan is the largest exporter of machining centers. It exports twenty machines for every one imported.
• Machining centers is a gargantuan market segment with Germany and Japan accounting for approximately 60 percent of all exports. However, Germany has been eroding away Japan’s dominant position since 2016.
• Japan’s machining center exports are closely correlated with China’s machining center imports.

Lathes (8458)

• Japan is the largest exporter of lathes. It exports ten machines for every unit imported.
• Japan and Germany combined account for almost half of global exports.

Drilling Machines (8459)

• Germany accounts for over one-quarter of drilling machine exports.
• There has been a large drop in Japan’s exports of drilling machines since 2013. It has fallen from second to sixth place. Global exports of drilling machines fell in the same period but by a lesser order of magnitude.

Grinding Machines (8460)

• Germany and Japan combined account for almost half of global exports.
• Germany has maintained a sizable lead over second-placed Japan since 2013.
• Switzerland has a relatively large trade surplus in grinding machines. While only the third largest exporter, it manages to export eight machines for every unit imported.

Gear Cutting Machines (8461)

• Germany is the dominant exporter of gear cutting machines, exporting six machines for each one it imports. Japan is not an important player in this category.

Special Purpose Machines (8456)

• China leads exports of special purpose machines, with 400 percent growth since 2010.
• This category covers a wide variety of equipment, is growing, and not yet dominated by a single country.

Table 2 summarizes the export performance of Germany and Japan in 2020.

Competition Between Germany and Japan

Japan and Germany are widely recognized as the world’s leading producers and exporters of high-end machine tools. In this section, we look at the extent to which Germany and Japan have penetrated each other’s domestic markets as a measure of their competitiveness. Chart 6 compares Germany’s and Japan’s global imports of machining centers with imports directly between the two countries. Actual data points are found in Table 3. The original version of this article includes an interactive chart comparing Germany and Japan across all types of machinery. Click this image to jump to the interactive chart.

Here are some observations about metal cutting machine tool imports between Germany and Japan based on the interactive chart.

Machining Centers (8457)

• Approximately 20 percent of Germany’s imports of machining centers are from Japan. However, almost 70 percent of Japan’s machining center imports are from Germany.

Lathes (8458)

• Approximately 20 percent of Germany’s imports of lathes are from Japan. However, Japan imports virtually no lathes from Germany.

Drilling Machines (8459)

• Germany is the third largest importer of drilling machines. However, virtually none are from Japan. Trade in drilling machines is virtually non-existent between the two countries.

Grinding Machines (8460)

• Germany is the third-largest importer of grinding machines, with almost none from Japan. Japan imports more from Germany although the actual amount is small.

Gear Cutting Machines (8461)

• Germany imports virtually no gear cutting machines from Japan. Almost 20 percent of Japan’s imports are from Germany although the actual amount is small.

Special Purpose Machines (8456)

• Japan supplies only 12 percent of Germany’s special purpose machine imports. However, Germany supplies about a third of Japan’s imports.

Table 4 summarizes Germany’s and Japan’s reliance on each other’s imports as of 2020.

In light of Table 4, we can make the following generalizations about the relative competitiveness of German and Japanese metal cutting machine tool technology.

KEY FINDINGS

1. Japanese users value highly Germany’s machining center technology and to a lesser extent Germany’s grinding machine technology. Conversely, Japanese users do not value Germany’s lathe technology.
2. German users value Japan’s machining center and lathe technology reasonably highly and about the same extent. However, German users do not value Japan’s grinding machine technology.
3. The amount of trade in drilling machines and gear cutting machines between Japan and Germany is negligible. Therefore, it is reasonable to assume that neither country values the other’s technology. 
4. It is not clear which of the various technologies included in the special purpose machines category are driving imports. Japan imports less, but is more reliant upon German technology.

Conclusion

Germany and Japan have taken different approaches to growing their machine tool industries. While both are export-oriented, Japan is traditionally considered a hard market to penetrate, with most domestic demand being largely satisfied by domestic production. In contrast, Germany exports more of its domestic production and imports more to satisfy domestic demand. As a result, Japan leads the world in machining center and lathe exports while Germany is nicely positioned as an all-round player.

I hope this article has started you thinking about the possibilities for interactive marketing materials and how large data sets can be easily understood using interactive charts. Or maybe this article will act as a springboard to further exploration of the machine tool industry, if that is where your interest lies. Please contact me through LinkedIn or via the Jamas home page if you have any marketing requirements in Japan.

The original interactive article can be viewed on the Jamas web site.

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Footnotes:

1. Spare parts and accessories are not included in these HS codes.

2. India was actually the 12th largest producer. It was included instead of France due to its growing importance.

About the Author

Gary Inwood is Marketing Director at Jamas Ltd., a Japan-based B2B marketing agency specializing in technology and industrial marketing.