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Vision & Innovation Rainer Hundsdörfer, President and CEO, Michael Weinig AG talks to Goh Tz’en Long about the current state of development of the woodworking industry and Weinig’s strategies for keeping ahead.

How do you feel about the current state of development of woodworking machinery in the world? On the one hand, there is advanced state-of-the art equipment from European countries such as Germany incorporating a very high level of innovation and automation, and on the other hand there are machinery manufacturers in China and Taiwan offering competitive pricing for products that are gaining popularity with smaller businesses.

I think all this is linked up with the change in overall business, basically the migration of woodworking from traditional woodworking regions such as Central Europe or North America to Asia and Eastern Europe. In the welldeveloped countries, no one is going to work with simple woodworking equipment. But if you look to China, India or Russia, where people are starting with woodworking, on one hand they cannot afford sophisticated equipment and on the other hand there is no need for it because they have cheap labour. Therefore the market for highly engineered equipment is very small.

This is the challenge for companies like Weinig or Homag and typically the European suppliers who are very strong in the field of innovative, highly flexible, highly productive systems. But in these emerging markets you need simpler machines to start production immediately. We have responded to that. One of our reactions is our plant in Yantai where we produce relatively simple machines and we will continue

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to do, so because I’m well aware that there are large emerging markets where price is a big issue and our challenge is to compete there and be successful. Weinig will take up the challenge to provide our customers initially with, perhaps less sophisticated, but still high quality products. That’s where I think we can continue to differentiate ourselves very much from other Chinese manufacturers.

At the same time, we believe that there is a good chance, even in the mid term, to differentiate ourselves in that market as well, because there are still good ideas required; different ways to approach business with low cost equipment. And as long as Chinese and Taiwanese companies just copy, as they do, they can never be any better.

How does Weinig keep up such a high level of innovation and bring diverse technologies to common woodworking processes?

We need to offer our customers better solutions because at the end of the day each customer is only going to pay for what he gets. That means: offer a way for the customer to make more money. One way to achieve this goal for the customer is by making cheaper equipment. That’s the Chinese part of the way. Our part is to find better manufacturing methods for them, better ways to serve their own customers and needs. That is basically what we are focused on with new technologies.

Innovation is not made for the sake of it. That’s very nice for engineers but

not very good for business or for our customers. Because they are not going to buy innovations as “nice to have”, if it doesn’t help them to produce in a better way. This is the basic idea.

We as the WEINIG Group understand that improving the business of our customers is what we need to do.

Therefore we have to make a big effort in developing those solutions, so we have large groups of engineers and technicians researching and developing new fields and new products. Sometimes we have to take the risk to develop something even when we are not 100 percent sure if it’s going to fit the market, because as first you have to teach the market about these new possibilities.

That is our general philosophy and we will continue because that is definitely our chance to be successful for the next 10, 15 or 20 years.

Looking into the future, what will be at the forefront of woodworking machinery research and development?

One thing which will continue to be important is to combine productivity, quality and flexibility because that is becoming more and more of an issue,

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even in China. Also more and more a topic is the increase of the degree of automation. If you take the human out of the process and automate it so you get a very constant high level of quality. This will certainly be an issue in countries like China or India at same point, where the labour cost is not really an issue but the consistency of the quality is.

Another area we believe is going to be a big issue in the next few years or sooner is dealing with the very low skill levels we have in the industries of our customers. That means to make the machines, and in particular the sophisticated machines, as easy to operate as possible. Right now, sophisticated machines are still quite a challenge to operate. We have to use all the brains of the machine to make it as simple as possible. That is certainly one major direction.

Energy is also an aspect which is quite interesting and important. Energy costs are going up and up, so we have to optimise our machines and equipment so that they use less energy. That is certainly also becoming more and more an issue. The machine that consumes only half the power for the same process is going to have a big competitive advantage. Last but not least we have to bring the cost of the equipment down, which is a continuing activity.

machine. But just like on-line support service there are few people who are actually ready for these programmes.

Most of them want to buy and own the equipment and typically they own the equipment for a very long time. They don’t replace it after seven, eight or nine years. The customers don’t really

understand that they don’t own the machine but rather the productivity of the machine. But we offer those programmes and I am sure that this trend will continue. If we have the chance to sell our Weinig machines by volume we can be much more competitive than cheaper machines. Of course the initial

A current trend among some woodworking manufacturers is the development of ‘complete care’ programmes, where customers pay per m2 they produce instead of tooling, parts etc. Does Weinig have or plan to have similar programmes in place?

Yes, we already have plans like that in place. In some countries and markets which are receptive to those programmes, we are offering, for example for moulders, that the customer pays for produced volume and not for the

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investment is higher, but that is really not the issue, and that’s what people need to understand. If you look at the total costs of ownership, the Weinig machine is highly competitive. We like the volume-approach because we can really prove to the customer that our machine is not expensive. Typically the customers who use WEINIG machines are the successful ones.

Weinig currently manufactures machineries at its Yantai factory in China for the local market and some for export. Do you see the export market growing?

As the emerging markets grow, and their need for low level equipment increases, we will not be able to satisfy them from Germany anymore. So we will certainly serve more and more from China in future. Our Chinese factory is going to grow, no question. And maybe more products than just moulders and double end tenoners are going to be produced there. Our high end equipment will still be produced in Germany, in the foreseeable future.

But at the low end, where we need to match high quality with some sophistication but not high tech, and offer very competitive pricing, that certainly is the strength of our factory in China in general. It is not high tech but it is very competitive in the field of low to medium technology.

What is your forecast for the China market in 2006?

Overall, I think there is no doubt that China is going to grow and our business is going to grow significantly over the next few years. Our main competitors are from China. It is not easy to protect our market share but we want even more market share in China. Now, I think we have about 40-50 percent. We will put our efforts into not only keeping our market share but, to growing

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our market share in China. The 40-50 percent is for products that we make in China, I’m sure we will achieve the same for any product group of the process chain that we will start to manufacture in China.

Can you comment on the market in Southeast Asia and the regions that are showing great promise?

Southeast Asia has been difficult in the last few years, and it is probably going to be difficult for political reasons, for example the bans which are sometimes lifted and imposed again on using the local timber. I think it is also going to be quite difficult as illegal timber and timber supply in general appear to be a major problem; it is not going to help the woodworking industry in general in Southeast Asia.

I don’t know what is going to happen to Indonesia, probably no one does.

So it’s going to continue to be a difficult market but there are some nice exceptions, such as Vietnam where woodworking industry is growing. It is a country that even the Chinese find less expensive, with cheaper labour than even China itself. But also with all

these anti-dumping issues in the US, Vietnam is a way out for some of the Chinese furniture manufacturers who go there so they can still keep the business going if they get hit with another anti-dumping law, as happened last year. It is one emerging region I see as possibly growing in the next three years, and last but not least, a really good market for us.

What will it take to safeguard Weinig’s market leading position in the woodworking industry for the next 100 years?

100 years is a very long time to predict, so let’s just talk about the next 10 years. It is really about us dedicating ourselves to the solid woodworking market, that we put all our brains, all our innovations into this sector and continue to work with all our abilities to improve the performance of our customers. And in doing this, taking all our competitors, even the small ones, very seriously. If we do that, very thoroughly, very consistently, I think the next 10 years will not be a problem and we can look forward to the next 10 years after that. FDM

Rainer Hundsdörfer (right) and Liu Xiangfei (left), Sales & Marketing Director, Michael Weinig (Yantai)