Hardware industry encounters transformation and upgrade pressure

The hardware industry is currently facing significant pressure for transformation and upgrading. The slow pace of structural adjustment, stagnant overall service levels, and the growing gap between modern manufacturing and the tool industry's needs have all contributed to this challenge. As a result, the sector is under increasing strain to adapt and evolve. In the early stages of development, the number of hardware tools surged dramatically, marking a period of planned economic expansion. All industries were driven by a focus on quantity, but the tool industry stood out with an unprecedented surge in production. By the late 1980s, key enterprises in the tool industry had built up an annual capacity of 300 million high-speed steel cutting tools and over 10 million measuring instruments. This placed China at the top of global production in terms of high-speed steel cutters. Meanwhile, Japan, a major competitor, reached a historical peak in its high-speed steel cutting tool output of 120 million units per year. However, as the manufacturing industry evolved, demand for standard cutting tools declined, leading to a drop in output to around 90 million units. Despite having a smaller manufacturing base than Japan, China's tool output was three times that of Japan, signaling a dangerously inflated market. This overproduction began to affect the export market, where prices were repeatedly reduced—some companies even lowered them by 40% to 50%. With sales barely reaching 200 million, it became clear that excessive production was the root cause of the problem. In the mid-to-late 1980s, optimistic market forecasts led many key players in China’s tool industry to expand aggressively, including establishing numerous joint ventures to boost production capacity. Over time, many of these joint ventures broke away from their parent companies, while some state-owned enterprises saw employees setting up private factories, giving rise to the first wave of private and township enterprises in the tool industry. These new entities offered more flexible operations and were free from the legacy burdens of state-owned enterprises. They had the potential to become a driving force in the industry's reform and development. However, due to limitations in talent, technology, equipment, and management, many of them continued down the path of quantity expansion, leading to a sharp increase in low-end products such as twist drills, construction bits, woodworking tools, and calipers. Although the volume was high, these products accounted for only about 30% of the domestic market value. Due to brand and quality issues, they remained outside the formal manufacturing tool supply chains both domestically and internationally, yet they significantly impacted China’s tool export market. Another critical issue was the failure to align with global technological trends. The industry missed the opportunity to upgrade its product structure and services, resulting in a widening gap with foreign competitors. While Western countries entered the post-industrial era in the 1960s and later embraced high-tech industries, China lagged behind. Modern machining demands high-precision, high-efficiency, high-reliability, and specialized tools. However, the traditional model of standardized, generalized, and mass-produced tools struggled to meet these evolving requirements. Developed countries moved toward the "three highs and one special" approach, while China remained stuck in outdated methods. By the early 1980s, the four-roller twisting process, once widely used, had been phased out abroad. In contrast, China continued to rely on similar outdated technologies. As a result, many weaker companies fell behind and eventually exited the market. The growing gap between China’s stagnant tool industry and the rapidly advancing foreign sector is now inevitable. Industry insiders often complain about weak markets and sluggish sales, but the real issue lies in the mismatch between changing market demands and outdated production structures. According to data from 1998 to 2000, the annual import of cutting tools rose from over $40 million to more than $80 million, showing strong demand for high-tech tools. This highlights the urgent need for the Chinese tool industry to transform and upgrade to remain competitive in the global market.

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