Elite Craftsmanship Captures Apple's Eye
CommonWealth Magazine was recently granted an exclusive peek at Catcher Technology's highly secretive Apple production line, unveiling just how Taiwan's biggest maker of metal notebook computer casings struck gold.
Elite Craftsmanship Captures Apple's EyeBy Benjamin Chiang
From CommonWealth Magazine (vol. 475 )
The early summer sun beating down on southern Taiwan is lethargy-inducing, but just off Provincial Highway No. 1 in Tainan's Yongkang District, things are abuzz at the headquarters of Catcher Technology Co., Ltd. Client HTC's latest tablet computer and mobile phone handset are about to hit store shelves, and Catcher's production lines are running full tilt night and day.
Catcher is the world's biggest maker of metal housings for notebook computers. For every ten notebooks with metal casings, Catcher produces four of them.
The manufacture and processing of metallic casings has long been seen as a low-tech, grease-monkey sort of industry, but the key to Catcher's ability to work its way to world number one, and maintain high profit margins of more than 40 percent over the long haul, lies in innovation.
Forty years ago, Catcher was just another unremarkable sheet metal plant cranking out metal housings for electric fan motors in Yongkang District, Tainan City. The company then calculated its processing fees by weight – just a few dozen New Taiwan dollars per kilogram.
Catcher's client list now reads like a Who's Who of top-shelf international brands, including Apple, HTC, Hewlett-Packard and Dell. The thin metal casings weighing less than 200 grams that the company produces fetch as much as US$10 or more per unit.
After branching out in a new direction 23 years ago, Catcher has seen its operating revenue grow a thousand-fold.
At the 2008 product launch for the MacBook Air, when Apple CEO Steve Jobs extolled his new gadget as the world's lightest, thinnest notebook computer, few were aware that the metal casing had come from Catcher. Without Catcher's design capabilities, Jobs would have been unable to unveil the new laptop with his customary flair.
Notebook as Jet Fighter
Each of the production lines in Catcher's plant is engaged in turning out the casings for their clients' latest mobile phone handsets, tablet computers and notebook computers.
For the past 40 years, Catcher has declined to show its production lines to the public, but CommonWealth Magazine was granted an exclusive peek at the company's most secretive production line, which turns out Apple casings.
Catcher has innovatively adapted aerospace technologies originally used in the manufacture of fighter jets to a precision process creating the cases for Apple's laptops.
Along the assembly line, technicians place aluminum plates into computer numeric controlled (CNC) machinery for precision processing as 24 blades swing into action on a plate of aluminum with a surface area no bigger than a sheet of A4 paper, carving out a complete unibody computer case with absolutely no seams.
Catcher specifically built this area of the plant as part of its efforts on Apple's behalf. Here, just 40 completed notebook computer cases can be produced from each 200-kg ingot of aluminum, though each case weighs in at less than 200 grams.
During its 11 years in Suzhou, China, Catcher has built up the world's most massive CNC precision processing machinery force, with more than 10,000 CNC machines in operation, surpassing even major Japanese automobile plants.
It's that massive production capacity that keeps clients onboard, continuing to place their faith in Catcher's design and mass production capabilities.
"Today, whatever the product in whatever quantity, there's basically nothing we can't handle," says Catcher's low-key president Allen Horng in a rare moment of boastfulness over his company's competitiveness.
The advantages Horng has crafted result from a drive to stay on the cutting edge. To innovate new standards, one must start from the very basics and soldier on until the job is done, being pushed to the extreme as a means of survival.
Hands that Wielded Scalpel Now Smelt Alloy
Two decades ago, the sun-burnished Horng had been a top student throughout his whole academic career, gaining entry to Tainan First Senior High School and eventually National Taiwan University's College of Medicine.
Horng had initially reckoned on spending his life as a high-paid practicing physician. But 23 years ago, an unanticipated spate of cut-throat competition throughout Taiwan's aluminum alloy casting industry left his father's small company in dire financial straits. As the eldest son, Horng had no option but to cast aside his white lab coat and head back to his hometown to become a grease monkey helping out with the family business.
By 1988, the cost of cast aluminum goods had fallen below NT$100 per kg, but when Horng noticed that the cost of goods crafted from magnesium alloys had reached a cost of several thousand New Taiwan dollars, he decided to branch out in that direction.
Accustomed to wielding a scalpel, Horng was a complete novice when it came to magnesium alloy processing technologies. What's more, the supply of magnesium alloy raw materials was completely monopolized by Japan and Europe. Japanese businesses scoffed at Catcher's efforts to break into the field, and absolutely refused to supply Horng with raw materials.
Horng was forced to gather his two younger brothers and scour the junkyards of Tainan's Wanli District for scrap magnesium. From there, the scraps would make their way to his father's tin-roofed plant, where the three would endure the searing heat of the smelter as Horng endeavored to teach himself how to refine high-purity magnesium alloy, dripping sweat, a textbook on the subject borrowed from the library in one hand.
With the pressure on and their backs to the wall, the three brothers came through. They eventually succeeded in producing Taiwan's first domestically produced ingot of magnesium alloy, but clients had little faith in the technological capabilities of this tiny company.
In Taiwan, Horng had initially been a doctor, admired by all. Now he found himself having to swallow his pride and go calling on prospective clients to secure orders.
His most indelible moment came on his first trip to Singapore to meet with a maker of hard disk drives. Horng recalls that immediately upon entering the meeting he was subjected to rude questioning from the fresh-out-of-college procurement manager: "What's your competitive advantage? Why should I use you?"
Upon returning to Taiwan, Horng paused for some reflection. He sensed that, instead of traveling hither and yon in search of clients, it would be better to pool company resources to develop the latest technologies in a concerted effort to break into the supply chains of a few select clients with the most exacting specifications.
Acting on this idea gradually allowed Catcher to deftly move into the business of supplying housings for hard disk drives and notebook computers, becoming Taiwan's biggest maker of metal notebook cases.
"Unibody" Rises to Challenge
Catcher continued to charge through the ranks of the metal computer housing business, attaining profit margins of better than 40 percent. Peeved contract manufacturers of notebook computers began flocking toward vertical integration, setting up production facilities to manufacture their own computer cases and other components. A price war within the computer case industry was about to erupt.
Facing an unprecedented challenge, Horng elected at this critical moment to transform Catcher, refusing to engage in a price war to ensure continued operating revenue growth.
"That was a tough decision. Catcher was ideally positioned to win a price war to the death, but we were unwilling to go that route," Horng emphasizes.
When Horng decided to move the company toward development of higher-end smartphone and tablet computer cases, a number of clients took the step of presenting him with competitors' price lists and demanding that Catcher would have to cut its prices if it wanted to get any orders.
"But Catcher refused, preferring instead to relinquish a short-term rush of business in favor of a brighter future," recalls David Hung, younger brother of Allen Horng and general manager of Catcher Technology (Suzhou) Co., Ltd. For Catcher to adopt that policy at that time was a bit of a struggle, Hung says.
Catcher business had initially been growing at an annual clip of about 20 percent, but Horng was willing to set aside two years for the company's transformation. As a result, operating revenue slid 10 percent in 2009. Analysts and investors were not sanguine about Catcher's transformation, and the company's ratings soon began to reflect that.
But Horng was not to be deterred, personally leading Catcher's R&D team in developing their latest "unibody construction" method. What that basically entails is using CNC machinery to carve the desired design shape from a single solid aluminum blank. The strength of the unibody cases is several times greater than that of conventional hard computer cases, and with their sleek, seamless appearance, they looked poised to become the market mainstream.
Dissatisfaction with the status quo and a drive to break through to the next level eventually made Catcher a player in the newly emerging areas of smartphones and tablet computers. Operating revenue from sales of non-notebook portable 3C products now account for more than 40 percent of operating revenue and have created a new peak in growth.
A New Elite Benchmark in Industrial Arts
In an effort to secure international OEM orders, Catcher has long forged its exceptional, world-beating skill set, frequently anticipating client demands in an opportune fashion.
At one end of Catcher's Apple production line lies another of the company's pioneering works.
Apple demanded that Catcher design a translucent power indicator light into the wireless keyboard, so that even though no cracks or holes are physically evident in the aluminum alloy surface, illumination nonetheless comes shining through.
This seemingly simply notion would once again test the limits of Catcher's industrial artisans. Catcher's development team used a laser to drill tiny holes one-third the diameter of a human hair on the inside edges of the keyboard, allowing the light to pass through without any holes being visible to the consumer.
"Catcher provides clients with mass production together with boutique-quality design capabilities," David Hung asserts.
Over the past two years, Catcher has quietly invested more than NT$4 billion in Tainan to expand production capacity five-fold.
"During the past decade, Catcher has relied on its Suzhou plant to grow itself," says Catcher senior vice president Michael Yeh. "Over the next decade, Taiwan will be our base of innovation."
Taiwan's population accounts for just 0.003 percent of the global total, yet on the back of continual innovation and a capacity to change, it has managed to cultivate world-beating companies like Catcher Technology.
Translated from the Chinese by Brian Kennedy