Metal Cutting Machine Tool Exports Between Germany and Japan

Types of Metal Cutting Machine Tools

Metal cutting machine tools account for approximately 75 percent of global machine tool production. They are used to remove excess material from a workpiece by cutting or grinding. Examples of metal cutting machine tools are machining centers, lathes, drilling machines, grinding machines, and gear cutting machines. Special purpose machinery such as laser machines, ion beam machines, ultrasonic machines, electrical discharge machines (EDM), and 3D printers for additive manufacturing, are also usually categorized as metal cutting machine tools.

In contrast, the remaining 25 percent of global machine tool production is accounted for by metal forming and processing machinery which stamp, roll, or bend sheet metal into a finished shape. Examples of this type of machinery are mechanical presses, hydraulic presses, shearing machines, and bending machines.

Methodology and Scope

Table 1 shows the Harmonized System (HS) product codes [1] for the six categories of metal cutting machine tools included in this article. The years covered are 2010 to 2020. The average annual US dollar rate is used for comparison. The countries included are China (CHN), Japan (JPN), Germany (DEU), Korea (KOR), Italy (ITA), USA (USA), Taiwan (TWN), Switzerland (CHE), Austria (AUT), Spain (ESP), and India (IND) [2], which were the top eleven machine tool producers as of 2020.

The base data is machine tool production statistics published by the German Machine Tool Builders’ Association in its annual Market Report. A ratio representing the share of metal cutting machine tools in the total is applied to derive metal cutting machine tool production data. The ratio is calculated from the most relevant statistics available, including government production surveys, order information, and trade figures.

Metal Cutting Machine Tool Production Trends

While consumers of metal cutting machine tools are scattered around the globe, production is concentrated in three countries—China, Japan and Germany. Combined these countries account for approximately 61 percent of global production. A second group of five countries—Korea, Italy, USA, Taiwan and Switzerland, account for approximately 29 percent, and a third group of countries—Austria, Spain and India, account for approximately 4 percent, meaning the top eleven countries account for approximately 94 percent of metal cutting machine tool production. Production for these three groups is shown in Chart 1. A full data set is provided in Table 2.

Instructions

China is by far the leading producer of metal cutting machine tools. However, most of its production is consumed domestically and a large proportion of its production is lower-end equipment. Foreign companies also produce in China, servicing the local requirements of foreign manufacturers. However, China’s growth in machine tool demand is slowing with foreign manufacturers starting to shift production facilities to ASEAN countries where labor is less expensive.

Overall production levels in Japan and Germany are approximately the same and both countries export the majority of their machine tool production. For example, in 2020 Germany exported 71.5 percent of its production and Japan 61.9 percent. However, in the same year Germany imported metal cutting machine tools equivalent to 21.7 percent of its production, while Japan only imported 6.5 percent.

The machine tool industry is subject to sharp swings in domestic and overseas demand caused by changes in economic outlook, currency movements, and geopolitical conflicts. However, there is rarely any change in market shares due to barriers to entry such as technology and long-standing customer relationships. An exception is India, which while still small in scale, has the potential to advance to the second group with development of its automotive and electronics industries.

Metal Cutting Machine Tool Export Trends

More than anything else, Chart 2 illustrates the dominance of Japanese and German metal cutting machine tool exports. Germany is the largest exporter of metal cutting machine tools, occupying the number one or two position in exports of all types of machinery, while Japan is overwhelmingly dominant in several categories of equipment.

Instructions

Some metal cutting machine tool export trends apparent from Chart 2 are as follows.

Table 3 summarizes the export performance of Germany and Japan in 2020.

Competition Between Germany and Japan

Japan and Germany are widely recognized as the world’s leading producers and exporters of high-end machine tools. In this section, we look at the extent to which Germany and Japan have penetrated each other’s domestic markets as a measure of their competitiveness. Chart 3 shows Germany’s and Japan’s global imports and also imports directly between the two countries. Actual data points are found in Table 4.

Instructions

Here are some observations about metal cutting machine tool imports between Germany and Japan based on Chart 3.

Table 5 summarizes Germany’s and Japan’s reliance on each other’s imports as of 2020.

In light of Table 5, we can make the following generalizations about the relative competitiveness of German and Japanese metal cutting machine tool technology.

FINDINGS

Japanese users value highly Germany’s machining center technology and to a lesser extent Germany’s grinding machine technology. Conversely, Japanese users do not value Germany’s lathe technology.

German users value Japan’s machining center and lathe technology reasonably highly and about the same extent. However, German users do not value Japan’s grinding machine technology.

The amount of trade in drilling machines and gear cutting machines between Japan and Germany is negligible. Therefore, it is reasonable to assume that neither country values the other’s technology.

It is not clear which of the various technologies included in the special purpose machines category are driving imports. Japan imports less, but is more reliant upon German technology.

Conclusion

Germany and Japan have taken different approaches to growing their machine tool industries. While both are export-oriented, Japan is traditionally considered a hard market to penetrate, with most domestic demand being largely satisfied by domestic production. In contrast, Germany exports more of its domestic production and imports more to satisfy domestic demand. As a result, Japan leads the world in machining center and lathe exports while Germany is nicely positioned as an all-round player.