Hardware industry encounters transformation and upgrade pressure

The hardware industry is currently facing significant pressure to transform and upgrade. The slow pace of structural adjustment, combined with stagnant service levels, has created a growing gap between the modern manufacturing sector and the tool industry's ability to meet evolving demands. This mismatch has intensified the need for change within the hardware industry. In the early years, the number of hardware tools surged dramatically, entering what could be described as a planned economy era. Every industry aimed to expand in scale, but the tool industry saw an especially rapid increase. By the end of the 1980s, over 100 key enterprises had built up an annual capacity of 300 million high-speed steel cutting tools and more than 10 million measuring instruments. China led the world in the production of high-speed steel cutters. Meanwhile, Japan, a major competitor, reached a historical peak of 120 million high-speed steel cutting tools annually. However, as manufacturing advanced, demand for standard cutting tools declined, and Japan’s output dropped to around 90 million units. Despite having a smaller manufacturing base than China, China’s tool output was three times that of Japan—indicating overcapacity and inefficiency. This expansion in quantity began to affect the export market. Over the past five years, prices have been repeatedly reduced, with some companies cutting prices by as much as 40% to 50%. Sales remained low, reaching only 200 million, highlighting the consequences of overproduction. In the mid-to-late 1980s, optimistic market forecasts led many key players in China’s tool industry to not only expand their own operations but also establish numerous joint ventures to boost production capacity. Later, many of these joint ventures became independent, while some state-owned enterprises' employees set up their own factories, giving rise to the first wave of private and township enterprises in the tool industry. These new enterprises were more flexible and free from the historical burdens of state-owned enterprises, potentially becoming a driving force for reform. However, due to limitations in talent, technology, equipment, and management, many still followed the old model of expanding quantities. Within just 10 years, total production soared, with billions of low-end products such as twist drills, construction drills, woodworking tools, and calipers flooding the market. Although the numbers are impressive, sales accounted for only about 30% of the domestic market value. Due to branding and quality issues, these products have not entered formal manufacturing tool systems at home or abroad, yet they have significantly impacted China’s tool export market. Another major issue was the failure to respond to global technological trends. The industry missed opportunities to modernize its product structure and services. After 20 years of reform, the gap between China’s tool industry and foreign competitors has widened, not narrowed. Western developed countries moved into the post-industrial stage in the 1960s, and by the 1980s, they entered an era dominated by high-tech industries like information, biotechnology, and new materials. During this time, information technology, automation, and modern management practices were widely adopted, raising mechanical product standards to new heights. As a result, the machinery industry demanded higher precision, efficiency, reliability, and specialization in its tools—commonly referred to as the "three highs and one special." This shift created a contradiction with the traditional model of standardized, generalized, and serialized production. By the early 1980s, the four-roller twisting process, once used in the 1960s, had already been phased out in developed countries. Meanwhile, the foreign tool industry focused on upgrading to meet modern machining needs, investing heavily in capital and innovation. China, however, missed these critical development opportunities, leading to the decline of weaker companies. From these developments, it's clear that the widening gap between China’s stagnant tool industry and the rapidly advancing global industry is inevitable. Industry professionals often complain about weak markets and sluggish sales, but the real issue lies in a mismatch between market demand and production structure. According to statistics from 1998 to 2000, the import of cutting tools increased from over 40 million to more than 80 million U.S. dollars annually, showing strong demand for high-tech tools in China. This highlights the urgent need for transformation and improvement in the domestic tool industry.

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