As the trade war continues to wage between the U.S. and China, it has generated new and unexpected opportunities for HOMAG ASIA. Udo Mauerer, the newly appointed vice president of HOMAG Asia/Pacific(APAC) & China since March, is coming onboard well-prepared and with great insights of the market.
He has been with HOMAG since 2002, with several leadership and management roles in sales, but always in APAC and China. PFA recently had the chance to catch up with him.
Udo Mauerer, Vice President of HOMAG APAC & China
The LIGNA tradeshow has always been an important barometer of the global woodworking machinery market. Despite a great amount of nervousness caused by the trade dispute, Mauerer found the responses from the APAC region to be better than expected.
“At first, we weren’t sure how customers would be reacting, whether they would be willing to spend their time and their money to come to Europe. But in the end, the turnout was much better. We had a lot of customers coming in organised tours from Taiwan, Malaysia and Thailand, where we arranged for them to visit some reference installations in Europe to show them the latest technology, production processes and how things are done in Europe…we probably had 60 to 70 customers organised in 3 separate tour.”
2018, A CHALLENGING YEAR
Nonetheless, 2018 has been a challenging year for HOMAG Asia, following a slow-down in the market. HOMAG’s office in Singapore is currently undergoing some restructuring to improve market coverage. “We realised that we do not have enough manpower in the market. The market was good, but we did not have enough capacity to follow up on all the enquiries.
In the next couple of months, we will set up an improved sales and service framework here in Southeast Asia for HOMAG Asia,” shared Mauerer.
With the ongoing trade war, some of HOMAG’s customers from China who export mainly to the U.S. are now finding ways to overcome the higher taxes. One of the considered solutions is to move some of their production outside of China, usually to Southeast Asia, by setting up their own plants – find a location, get all the legal procedures organised and set up a factory in say, Philippines, Vietnam or Malaysia. The other way is to look for some partners which they can cooperate with and do some sort of joint venture.
What Mauerer also noticed, since the beginning of this year is that some of the American buyers from China are looking for alternatives in Southeast Asia. “There is a lot of activity, a lot of coordinating, a lot of discussions with the customers. In fact, the Chinese customers are all well aware and well prepared but they can’t make the final decision because they don’t know whether they should continue to take the orders from the American side or should they move the production outside of China? This is a challenging moment for us. It is not that there is a downward trend in the market now, the market is doing fine,” said Mauerer.
NEW CROSS BORDER ACTIVITIES BRING FORTH NEW CHALLENGES
With this wave of new cross borders activities comes new opportunities and challenges for HOMAG Asia. Giving an example, Mauerer said that when a Chinese customer buys an equipment in the past, they just needed a contact in China. Now, these customers can contact HOMAG China, but the equipment may be going to other parts of Asia. “The challenge is that our people in China don’t know what the local facilities and requirements are, or who is providing the service. If the customer from China buys an equipment for a plant in Thailand, the Chinese organisation has difficulties sending the technicians from Thailand for the installation or service. This is where we have to make sure we have a closer link and communication between the local organisations,” explained Mauerer.
“We have to work much closer together now among the Southeast Asian and China offices because there are a lot of cross border activities where we have to focus on who is following up on the customers, who is taking the order, who is providing the service as well as who can provide what service. Also, we are now discussing and organising ourselves to look at an entire region, rather than individual countries.”
TOP THREE PERFORMING MARKETS IN ASIA
“Japan is doing quite well, so is Korea. Here in Southeast Asia, I would say it was Thailand, which is one of the stronger markets. India is doing well too,” remarked Mauerer.
“China has been the strongest market up till 2017. Then, we were seeing 50 to 60 per cent growth rate year to year. It was probably a bit of an unhealthy growth, as there was a lot of capacity that has been built up in the China market.”
“While our customers were also enjoying a high double-digit growth in their orders, delivering lines on our side were getting quite long too. Customers in China wanted to make sure they could receive their machines to fulfil all their orders on time, so they ordered probably knowingly that the delivery time was not six to seven months, but 12 to 15 months, or even 18 months. Whatever they could have ordered over two years, they put it in one order. And of course, all the machines are now arriving but now with the trade war, their businesses are not growing as much as it did the last two to three years.
There is now an overcapacity. I wouldn’t say the market is now in bad shape but they have built up so much capacity now that they probably need another one to two years to fill up all the capacity before they start to re-invest again.
Besides customers now moving into other regions for production, Mauerer thinks that software is certainly an upcoming trend. “There are more and more customers coming out to look into using software for customising furniture.
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This article was first published in the latest September/October issue of Panels & Furniture Asia.