Rethinking globalisation World of Tooling – An overview of emerging markets

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In a rapidly evolving global landscape impacted by events such as the Covid-19 pandemic and rising protectionism, understanding the dynamics of the tooling industry is more crucial than ever for companies. The World of Tooling 2022 study by the WBA Tooling Academy Aachen provides a comprehensive analysis of international tooling markets, spotlighting key players and emerging trends.

Tooling companies need to proactively adapt to disruptions in their supply chain and structure to meet the needs of their customers. One building block in responding appropriately to potential disruptions is knowledge of the tooling markets and how they are evolving. For example, the Covid-19 pandemic led to economic declines due to the collapse of supply chains, especially in 2020. More generally, rising protectionism and a new critical perspective on dependencies in global supply chains have changed the pace of globalisation. Although globalisation will not be reversed, there is a trend towards a greater focus on regional supply chains. To shed light on this development, the article focuses on three tooling markets that have improved their performance in recent years. The WBA Tooling Academy based its analysis on three studies in its World of Tooling series. The focus is on three countries in three different industrialised regions because of their positive development — the Czech Republic for Eastern Europe, Mexico for North America and Thailand for South East Asia.

In-depth guide based on robust data and expert analysis

The World of Tooling (WoT) study series provides companies and people in the tooling industry with well-founded statements on the performance of international tooling markets. The 2022 WoT study presents the most relevant markets in detail and compares them in terms of market size, tooling competence and development potential. In addition to established tooling markets such as China, Germany and the USA, emerging markets not directly associated with tooling such as Thailand and Brazil are also presented. The descriptions and assessments are based on various quantitative and qualitative evaluation principles. These include expert interviews, benchmarking data, economic indicators and individual travel experiences. The benchmarking data is taken from the world's largest tooling database. This joint database of the Laboratory for Machine Tools and Production Engineering (WZL) and the Fraunhofer Institute for Production Technology (IPT) currently contains more than 1,000 benchmarking data sets not older than five years from German tool shops and more than 3,000 evaluated international tool shops. This database is enriched with data from publicly accessible databases and portals such as Comtrade, Eurostat and the International Special Tooling and Machining Association (Istma) as well as data from the Federal Statistical Office and the German Engineering Federation (VDMA).

Beyond China and the USA: Unveiling new frontiers in the tooling market

The World of Tooling Radar provides an overview of all the markets considered and summarises the results of the study's analysis. It shows the current and future relevance of the most important tooling markets. Relevance is measured in terms of production volume and existing tooling competence. In addition, the development potential of each market is assessed. Four market groups can be identified that share common characteristics in terms of their market performance, namely Allstars, Established, Rookies and Rising Stars. This article focuses on three markets that have shown improvement since the last edition of the study and are considered to have further potential.

For the third time in a row, the Czech Republic shows a positive development and is now included in the group of Established markets. After a period of economic stagnation following the 2008 financial crisis, the Czech economy has been growing, with the manufacturing sector growing by almost 20 percent since 2015. The Czech Republic benefits greatly from its central location in the European Union, a common currency with its neighbours and wage levels below many of its competitors. This makes it an attractive destination for German FDI, despite its low labour availability. The strong link with the German economy is also evidenced by the fact that Germany is the Czech Republic's largest importer and exporter of injection moulding, sheet metal and solid forming tools. With an educated workforce and a growing economy in the heart of Europe, the tooling industry in the Czech Republic is seen as having a positive future with high potential for development.

Tooling in Germany

Can German tool makers defend their top position?

Geopolitical shifts are reshaping North America's tooling trade landscape

Mexico's positive performance can be partly attributed to the fracturing of US-China relations and the strengthening of the already close trade ties between Mexico and its northern neighbour following the election of US President Joe Biden. With a decisive advantage in labour costs, the Mexican economy has been able to capitalise on these advantages. Mexico overtook China as the US's largest trading partner in early 2023. Despite some progress and setbacks due to political circumstances in recent years, the economies of the two countries have long been closely linked, as evidenced by the Texas-Mexico automotive supercluster stretching from northern Mexico to Texas in the US. Many automotive companies continue to invest in the area, putting pressure on the development of the Mexican tooling industry, as in the past almost all the tools needed for the automotive sector were imported. As a result, tool imports into Mexico have fallen by as much as 23 percent in the category of sheet metal and solid forming tools. Meanwhile, Mexican tool companies are unable to meet the demand for tools due to a lack of skilled labour. Overall, the industry is not as developed as the size of the automotive industry would suggest. Its development is hampered by problems of infrastructure, education, crime and corruption. All of these issues need to be addressed in order to unlock Mexico's potential and attract additional foreign direct investment. In conclusion, the Mexican tooling industry is expected to develop positively from a current low level, given the level of economic activity in the north of the country. This dynamic development also led to the Rookie ranking.

Thailand, which has been included in the World of Tooling study for the first time in 2022, has also benefited from developments in China. The Thai economy has experienced strong growth in recent decades, moving from a low-income to an upper-middle-income country. Despite being included for the first time, Thailand's tooling industry boasts the ninth largest market size and ranks fourth in terms of potential. While Thailand has strong political ties with the US and Nato, it also has close relations with China. The political situation in Thailand is tense, partly due to a military coup in 2014 and increasing protests since 2020. Nevertheless, the Thai economy is expected to grow steadily in the coming years and has significant potential in terms of its workforce. The Thai government supports and promotes the tooling industry. The main export markets for tools are countries in the Asia-Pacific region, with Japan, Vietnam and India leading the way. As Thailand still has a large import surplus for tools, there is significant potential for the tooling industry as more manufacturing companies, especially from Japan and China, invest in the Southeast Asian country.

The results of the study show that despite the difficult economic situation and the associated uncertainties in international business, many tooling markets have developed positively. The tooling markets of Mexico, the Czech Republic and Thailand have demonstrated their ability to evolve in the face of current events and changes in the global economy and to take advantage of opportunities as they arise. In order to proactively develop and strengthen their strategic position, a detailed knowledge of both the status quo and relevant developments is required. This is where World of Tooling 2022 helps to build knowledge and make informed decisions. More information on the international tooling industry can be found in the World of Tooling 2022 study, published by the WBA Tooling Academy Aachen in October 2022. The study can be downloaded free of charge from the WBA website.

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