As the export value of China-made power hand tools is projected to exceed US$4 billion by the end of 2007, the country’s 2,000 suppliers are in a frenzy to boost their market competitiveness. Some will minimize price increases by streamlining operations, while others will invest heavily in new equipment and upgraded facilities. As a result, new tool releases are more energy-efficient, compact, durable and user-friendly than before.

Executive Summary:

Since 2005, China’s power hand tool shipments have continually topped US$3 billion, climbing an average of 17 percent annually in terms of value. Export sales neared US$3.8 billion in 2006, up 19 percent from the previous year.

Customs statistics from January to April indicate that the double-digit growth will continue in 2007. If the 26 percent increase experienced during this period is sustained, export value could exceed US$4 billion by the end of the year.

The growth is attributed mainly to the higher prices of products shipped overseas rather than to major changes in export volume. Most suppliers raised their quotes 10 to 15 percent in 2006 and during the early months of 2007 to cover the soaring cost of key raw materials such as copper and nickel.

Due to intense price competition, especially in the DIY sector, makers are focused on increasing export volume to maximize profits in coming months. As a result, they will strive to maintain current prices or at least limit further increases to boost the quantity of tools sold.

The following are some of the other major trends we see in China’s power hand tools industry:
•  Most suppliers are optimistic they will be able to keep additional price increases within 10 percent, since raw material costs have slowed their upward trend. The cost of copper, for example, rose by only 40 percent in the first four months of 2007 after doubling last year.
•  Makers will streamline operations to generate additional savings and maintain competitive prices. Greater investment in advanced machinery and management systems is therefore expected.
•  More environment-friendly designs will be released to increase sales to industrialized markets. Improvements on tool aesthetics, efficiency, service life, durability and ergonomics also will continue.
•  North America and the EU, which currently absorb more than 70 percent of China’s shipments overseas, will continue to be the main markets for power hand tools. Nonetheless, exports to Eastern Europe, the Middle East and Asia are expected to rise as stricter product standards force makers to reduce their dependence on the two traditional markets.

This report covers the four major categories of China-made power hand tools: drills and routers, saws, sanders, planers and grinders, and fastening tools. Product descriptions and factors related to quality and market positioning are discussed in the Products & Prices section.

An overview of the major production processes, which for most makers focus on assembly, QC and packaging, is presented in the Manufacturing section of the report.

The composition of the supplier base and the key characteristics and capability of small, midsize and large makers are covered in the Industry Overview. An analysis of the key issues and trends affecting suppliers is also provided in the section.

To reflect the industry structure, a mix of locally owned companies, state-owned enterprises, and Hong Kong- and foreign-invested ventures were interviewed for this report. More than 70 percent of these are makers with direct-export capability, while the rest are trading companies or manufacturers that ship their products through third-party agents.

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