Uncertainties prevail World of Tooling – a market overview

A guest post by Prof. Dr.-Ing. Wolfgang Boos, Gerret Lukas, Niklas Kessler, Julian Schweins

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Since the last edition of the World of Tooling study from 2018, the competitiveness of the tooling industry and the general macroeconomic situations in the respective countries has transformed. What are the key challenges that the industry is facing?

Top 3 global tool exporters and their main export countries in 2020.
Top 3 global tool exporters and their main export countries in 2020.
(Source: WZA)

After a continuous increase in tooling demand until 2018, some changes in the international tooling market can be observed when compared to the last edition of the World of Tooling study from 2018. In contrast to the last edition of the study, no constant growth of the markets investigated was observed from a global perspective. In particular, the Covid pandemic led to economic declines due to the collapse of supply chains, especially in 2020. Nevertheless, a look at the world champions in tool export such as China, South Korea and Japan shows that the pandemic did not bring global value added flows to a complete standstill.

The continuing uncertainty in international business is forcing manufacturing companies from series production as well as toolmaking companies to increasingly deal with international toolmaking markets in the future. They are the key to reliably supply international production sites with tools, to realise cost savings and to react to capacitive bottlenecks with their own tool production.

The third, revised and expanded edition of the World of Tooling study provides companies and employees in the tooling industry with well-founded statements on the performance of international tooling markets. The study presents the twenty-six most relevant markets in detail and compares them based on their market size, toolmaking competence and development potential. In addition to established toolmaking markets such as China, Germany or the USA, emerging markets such as Thailand and Brazil, which are not directly associated with toolmaking, are also presented.

The creation of the descriptions and evaluations is based on various quantitative and qualitative evaluation principles. These include expert interviews, benchmarking data, economic key figures and individual travel experiences. The benchmarking data is based on the world's largest database in the field of toolmaking. The joint database of the Laboratory for Machine Tools and Production Engineering (WZL) and Fraunhofer Institute for Production Technology IPT currently comprises more than 1,000 benchmarking data sets of German tool shops as well as more than 3,000 evaluated international tool shops that are not older than five years. This database is enriched with data from publicly accessible databases and portals such as Comtrade, Eurostat and International Special Tooling and Machining Association (Istma) as well as data from the Federal Statistical Office and the Mechanical Engineering Industry Association (VDMA).

World of Tooling radar
World of Tooling radar
(Source: WZA)

Radar shows major toolmaking markets

The World of Tooling radar provides an overview of all markets considered and summarizes the analysis results of the study. It shows the relevance of the 26 most important tooling markets today and in the future. The relevance is measured by the production volume as well as the existing toolmaking competence. Additionally, the development potential of all markets is evaluated. Thereby four market groups can be identified, which show common characteristics related to the single markets contained therein, i.e. Allstars, Established, Rookies and Rising Stars.

Allstars describe those toolmaking markets that have both a large production volume and a high level of toolmaking expertise. These are Germany, Japan, South Korea, the USA and China. The latter is at the lower competence limit of the Allstars, but has by far the largest production volume. On the market average, China cannot yet be compared with the other Allstar markets in terms of toolmaking competence, as the Chinese market is characterised by a high degree of inhomogeneity. Nevertheless, there are already many toolmaking companies that demonstrate a high level of toolmaking competence and have excellent technological equipment.

The USA is the second largest toolmaking market in the world and belongs to the top group for all investigated tool categories in terms of production as well as export and import volumes. The industry, which had been shrinking for many years, is growing again due to increasing investment as well as import barriers put in place by the government. Germany, Japan and South Korea, with the exception of Switzerland, have the highest tooling competence. A large number of organisational and technological innovations of the tool and die industry have their origin here. The importance of these three markets will not decrease in the near future for the respective local industry as well as for the global procurement of highly complex tools.

Established are markets that have a high to very high toolmaking competence but a lower production volume than the Allstars. These include Italy, Canada, Austria, Spain, France, the Czech Republic, Portugal and Switzerland. With the exception of Italy, they are unreservedly suitable for the contracting of complete tools. For many years, Italy was a valued partner of the German automotive industry, especially for the complete contracting of sheet metal and solid forming tools. However, insolvencies and a lack of investments made the complete outsourcing of complex moulds no longer possible without restrictions. The Czech Republic, Austria and Switzerland benefit from their proximity to Germany and, at the same time, have good access to Eastern European markets. The Southern European region has suffered considerably from the Covid-related economic crisis. In contrast to Spain, however, Portugal has established itself as an important supplier thanks to the combination of low wages and proximity to the European automotive centers.

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The Rookie group includes the markets of Poland, Slovenia, Mexico and Turkey. Poland is experiencing a long-lasting, continuous upswing in the overall economy and in the tool and die industry, although this has slowed down slightly due to the political situation. Turkey and Slovenia are also experiencing rapid growth in the tool and die industry. However, while the industry growth in Turkey is higher than the competence growth, intensive association work in Slovenia ensures high tooling competence. Mexico is still one of the trend markets in 2022 but local companies are currently unable to satisfy the growing tooling demand. The lack of skilled workers can be identified as a major cause.

Emerging markets

The markets of Thailand, Brazil, Hungary, South Africa, India, Indonesia, Slovakia, Philippines and Vietnam are classified as Rising Stars. Indonesia and Vietnam, with fast growing economies of their own and located in the periphery of China, offer the basic conditions for the development of a local tool and die industry. Brazil has interesting local tooling networks, but due to very restrictive customs regulations they manufacture almost exclusively for the domestic market. India has not been able to meet the expectations for the development of the tool and die industry for many years, despite high overall economic growth. The country's underdeveloped and failure-prone infrastructure also continues to pose a problem. South Africa cannot show convincing growth trends as an economy. The toolmaking sector is still the positive exception in a manufacturing industry that is shrinking overall and suffering from ongoing structural problems such as the failure-prone energy supply. Thailand has by far the largest production volume of the Rising Stars, but is classified in this group due to its low level of toolmaking competence. Slovakia and Hungary have roughly the same low level of competence. The prospects in Slovakia are assessed positively due to the constantly rising Human Development Index and the growing economy. In Hungary, on the other hand, difficult political conditions currently prevail.

The results of the study show that despite the difficult overall economic situation and the associated uncertainties in international business, many toolmaking markets have experienced a positive development. In international comparison, the tooling markets of China, Germany, France, Thailand, Brazil, Slovakia and the Philippines in particular have experienced the most significant changes compared to 2018. Further information regarding the international tooling industry can be found in the study World of Tooling, which will be published by the WBA Tooling Academy Aachen in October 2022. The study can be downloaded free of charge from the WBA’s website.