The global outbreak of new coronavirus, which began in December 2019, was continuing at the time the author finished this document. Because China was the first country to implement citywide closures many factories were unable to reopen on schedule after Chinese New Year. Additionally, of those factories that could open on schedule, many of the workers who had returned home during Chinese New Year were either unable or not allowed to return to work; all of which led to chaotic situations in the upstream of the water purifier OEM business. Many Taiwanese manufacturers, who had originally purchased components from China, had to now purchase them from within Taiwan, and most expected that they would not to be able to buy them. The number of orders placed in Taiwan is more than the normal inventory would be for several months and It is therefore foreseeable that, after the end of the epidemic, the inventory of parts of each of these water purifier OEM will be greatly increased.
Development of global water purifier equipment
The development of the water treatment industry has taken place over a period of more than 110 years. If we look at the number of Aquatech Water Treatment Exhibitions we can see that, by 2019, they held a total of 55 biannual sessions (110 years). However, the real boom in development probably occurred around 1995, causing water purification to become larger and wider in scope, with more and more manufacturers joining the industry by the year 2000.
The competitive situation of the global water purifier industry
Officials and self-employed people in mainland China have discovered that water purification is a new and promising industry. One reason for this is that the rapid development of various light and heavy industries in mainland China over the past 30 plus years, has caused serious water pollution and the emergence of “cancer villages”, both of which have led the Chinese government and the private sector to fully invest in the production of water purification equipment, making the industry fiercely competitive; so much so that even the Chinese state-owned system has transformed into a semi-official company to produce water purification equipment and parts, subsidizing and supporting certain industry products (RO reverse osmosis membrane for example) and self-employed individuals within the industry.
The situation in a number of other emerging countries, such as Vietnam, India, Indonesia, etc., is the same as in China, where, because of the pollution of rivers and oceans, people have a demand for water purifiers, prompting more industrialists to invest capital in the development of the technology and in the importation of equipment in the water purifier equipment industry.
As a result, the demand for certain markets has led to the simultaneous development of water purifier equipment in these countries, which has also caused many manufacturers to research, develop, and manufacture their own products. Now, they are not just meeting domestic demands but are also adding the capacity to export their products and to expand the scale of their operations to countries such as Taiwan and South Korea.
There is no longer a Soviet Union!
Analysis of the advantages and disadvantages of the water treatment equipment industry in various countries
Advantages for Russia, Vietnam, Turkey, and Egypt:
- It is easy and cheap to acquire land in these countries.
- In Turkey the government offers preferential policies to encourage people to invest in the water purification industry.
- The countries all produce crude oil and can supply cheap raw materials for plastics.
- Low labor costs
- With large populations, the domestic market is sufficient to support this industry.
It is due to the large domestic demand market, low labor costs, easy access to land, and the low barriers to entry that these emerging countries have been able to rapidly expand their water purification equipment industry.
Turkey and Vietnam in particular are the rising stars of the water purifier industry and may soon replace China because, in addition to their above listed innate competitive advantages, their supply chain industrial clusters are quite complete. In Vietnam, most of them are clustered in Hanoi, while in Turkey they are clustered in Istanbul. The purchasing of water purifiers, raw materials, and spare parts is extremely convenient; water purification equipment is also widely used in the manufacture of plastic materials, which accounts for some of the demand. There are many usage ratios, and Turkey produces oil locally. It produces about 2.9 million barrels of crude oil and petroleum products every day, a figure equivalent to 3% of the global daily supply. Turkey also has naphtha cracking and plastic raw material plants. The aspect of convenience and cheap cost is even more powerful for the development of water purification equipment in Turkey.
Furthermore, in order to protect their domestic water purifier industry, the Turkish government has recently covertly raised the import tax on water purifier equipment from 1.7% to 16.7%, an increase of over 10 times, making a threshold that allows local Turkish manufacturers to be more competitive and to give them a greater advantage.
The information in the following picture was obtained from the local Turkish google shopping website. The price shows the retail price for the end consumer. The content includes films and pressure barrels… (but does not include booster pump. The retail price shows that, in Turkey, the market price of water purification equipment has reached bloodshed, but it can also be seen that the price advantage is cheaper than in mainland China.
Turkish people are hardworking, and most of them want to make money; this leads the author to conclude that, if there had been greater political stability over the past decade, it would have been possible for Turkey to have replaced China with regard to the manufacture of water purification equipment.
Disadvantages of Russia, Vietnam, Turkey, and Egypt:
- The clustering effect of peripheral component industries has not yet reached its peak in Russia or in Egypt
- The technical content of the water purification industry is low.
- The concept of quality needs to be strengthened.
- Companies are not willing to spend a lot of money to apply for product certification.
- Product automation is low.
By contrast, emerging countries entered the water purifier industry later, and the learning time is longer than that of advanced countries. Additionally, the accumulation of experience and the correction of failures also takes longer than in countries like Taiwan and South Korea. Another factor is that, because wages are low, there is no urgency within the industry to regenerate or to adopt the motivation of the automatic production model.
It is clear that, in order for an industry to have the right climate, suppliers need to converge into groups, in order to reduce the frequency of overseas purchases and to ensure the timely and immediate procurement of competitive key components locally. In the case of Russia and Egypt both countries either need more time to condense industrial clusters, or need to formulate a way to attract foreign investment and competitors from other countries to invest and set up factories in their country.
Taiwan and South Korea advantages:
These two countries entered the water treatment industry earlier, and have the following advantages:
- National quality awareness is superior to other emerging countries.
- Product innovation is relatively good.
- More attention is paid to product safety and durability.
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