Hardware industry is stuck in a vicious price war

In 2010, China’s production of automobiles and ships ranked first in the world, making the demand for hardware tools in the automotive and marine terminal markets significantly increased. This has given development opportunities to hardware companies that have suffered from price wars and their profits have been increasingly compressed. However, tens of thousands of hardware manufacturers in China have not yet shared this feast.

Low-end industry did not enjoy "fruit"

After decades of accumulation, China's hardware industry is the world's largest producer. Experts predict that due to the improvement of China's hardware manufacturing level and the expansion of production capacity, hardware products will maintain an annual growth of more than 10% in the next five years.

However, the competition in the hardware tools market in China is becoming increasingly fierce. The vicious price warfare among enterprises is the main competition method, and the brand concentration is relatively low. In the face of increasingly homogenous products, consumers' choices appear to be arbitrary, so the price war has not harmed the company's own interests but has not brought about an increase in market share.

China’s Hardware Alliance’s Yang Yingyuan told the “First Financial Daily” at the “2011 China Hardware Industry Finals Summit” held recently: “Although China currently has tens of thousands of companies that produce hardware tools, it is dominated by small and medium-sized enterprises. It is still a workshop-type small business with small shipments, single styles and many low-end products, while low-end products cannot meet the needs of the end market. This is the main reason why companies do not do much.

Therefore, if a hardware tool company can seize the opportunity to enter the terminal industries such as automobiles and ships, it will undoubtedly open up a large market for enterprises.

"Prior to this, the company's product prices have continued to decline, but sales have fallen, and profits have almost been eroded. After we entered the ship market in 2009, profits were three times higher than before." A ship tool Co., Ltd. CEO said with deep feelings.

However, there are only a few hardware companies that can enter the high-end fields such as automobiles and ships. Many companies said in an interview that the barriers to entry in the automotive and marine terminal markets are high and most SMEs cannot enter.

In addition, information asymmetry is also the reason why hardware companies cannot connect with the terminal market. Yang Xinfa, deputy secretary-general of the China National Shipbuilding Industry Association, pointed out: “Hardware companies should keep abreast of our demand information, and many times are due to barriers caused by information asymmetry. Now many shipyards use tools that are backward, but shipyards do not need a single tool. However, it is necessary to become a supporting tool, so if you want to enter the ship's terminal market, you must have matching and quality tools."

Product upgrade integration industry resources

How can China's hardware and tool companies occupy this market? Qian Zugen, deputy secretary-general of SAIC Motor Industry Association, told reporters: “The hardware tool industry needs to adapt to the high thresholds of automobiles and ships and implement product upgrades. Excellent product."

Noble Precision Equipment (Shanghai) Co., Ltd. Chairman Zeng Honglian believes that: "Hardware companies must win the R & D and innovation in the terminal market. In addition, they must also do their own brand. In the hardware industry, the brand is more important than the channel."

In fact, the Taiwan region is also dominated by small businesses, but it has now become the strongest manufacturer of hardware tools. In response, Xie Qingfeng, Honorary Chairman of the Hand Tool Industry Association of Taiwan, pointed out: “Hardware is a relatively low-end industry, but it can be made very high-end and very environmentally friendly, and the hardware companies in Taiwan have paid great attention to technology investment regardless of their size. The quality requirements are high."

However, this shift also made small businesses face a problem: there is not enough capital and strength to engage in technology research and development. Tian Hu, chairman of Hangzhou Superstar Steel Shield Co., Ltd., said: “We can also learn from the experience in Taiwan, conduct joint marketing within the industry, integrate industry advantage resources, form an industrial chain, and make full use of the resources within the industry to achieve a win-win situation.”

Yang Yingyuan believes: “In the industry, brand alliances can be formed, and then through the 'dialogue terminal' form, the alliance can establish a platform for direct information dissemination and communication between terminal representatives and enterprise representatives, and explore the docking mode of the tool industry to connect with other terminal industries.”