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Traditional hardware tool industry seeks market survival
In the era of the planned economy, nearly every industry experienced a push for expansion in scale. However, the tool industry stood out with its rapid growth. By the end of the 1980s, more than 100 key enterprises and designated manufacturers had established a production capacity of 300 million high-speed steel cutting tools annually, along with over 10 million measuring instruments. China's output of high-speed steel cutters ranked first globally. However, in recent years, the price of these tools has been repeatedly reduced—some companies even saw their prices drop by 40% to 50%. As a result, national sales have only reached around 200 million yuan, highlighting the problem of overproduction.
What is even more concerning is that during the mid- to late-1980s, due to an overly optimistic view of market prospects, major players in China’s tool industry not only expanded their own operations but also invested heavily in joint ventures to boost production capacity. Unfortunately, many of these joint ventures eventually became independent entities, breaking away from their parent companies. Meanwhile, some state-owned enterprise employees set up their own factories behind the scenes, giving rise to the first wave of private and township enterprises in the tool industry.
These new enterprises were more flexible in their operations and were free from the historical burdens faced by state-owned enterprises. They had the potential to become a driving force in the reform and development of the tool industry. However, experts point out that despite their rapid growth, many of these companies still face significant challenges. Limited access to talent, technology, equipment, and management expertise has kept them mostly at the stage of expanding numbers rather than improving quality. In just ten years, the total output surged to 1 billion units. However, most of these products are low-end items such as twist drills, construction bits, woodworking tools, and calipers. While the volume is large, their sales account for only about 30% of the domestic market value.
Although these products have not yet entered the formal manufacturing tool sales systems in China or abroad due to issues with branding and quality, they have made a noticeable impact on the country’s tool export market. Another critical issue identified by experts is the failure of the hardware and tool industry to keep pace with technological innovation and global manufacturing trends. Instead of seizing the opportunity to upgrade product structures and services, the industry remained stagnant.
After two decades of reform and opening up, the gap between China’s tool industry and its international counterparts has not narrowed—it has actually widened. This is a harsh reality that the industry must now confront and address.