In the current global science and technology landscape, there is a profound impact and transformation pressure on traditional manufacturing industries, including the tool industry. This has led to slow adjustments in the hardware industry structure, stagnation in overall service levels, and an increasing gap between the demand of modern manufacturing and the tool industry’s capabilities. As a result, the tool industry has found itself in a challenging position.
During the planned economy era, most industries aimed for expansion in quantity, but the tool industry was particularly affected. By the late 1980s, over 100 key enterprises in the tool industry had established an annual capacity of 300 million high-speed steel cutting tools and more than 10 million measuring instruments. China ranked first globally in the production of high-speed steel cutters.
Meanwhile, Japan, a neighboring country with a strong tool manufacturing base, reached a historical peak in its annual output of high-speed steel cutting tools at 120 million units. However, as the manufacturing industry upgraded, the demand for standard cutting tools declined, leading to a drop in output to around 90 million units.
Despite having a smaller manufacturing sector than Japan, China's tool output was three times that of Japan, indicating overcapacity and a dangerously expanded market. This excessive production has negatively impacted the export market, with prices being reduced repeatedly in recent years—some companies even slashing prices by 40%–50%. As a result, national sales have only reached about 200 million, highlighting the consequences of overproduction.
Another critical issue emerged in the mid- to late 1980s when key players in China's tool industry, overly optimistic about market prospects, not only expanded their own operations but also invested in numerous joint ventures to boost production. Many of these joint ventures later became independent, while some state-owned enterprise employees set up their own factories, giving rise to the first wave of private and township enterprises in the tool industry.
These new enterprises were more flexible and free from the historical burdens of state-owned enterprises, offering potential for innovation and development. Unfortunately, due to limitations in talent, technology, equipment, and management, many of them continued to follow the old model of expanding quantities, leading to a surge in total output. Over just a decade, the number of low-end products such as twist drills, construction bits, woodworking tools, and calipers skyrocketed, reaching billions of units.
Although the volume is large, these products account for only about 30% of the domestic market value. Due to issues with brand recognition and quality, they haven’t entered formal manufacturing tool systems abroad, yet they have significantly impacted China’s tool export market.
A second major mistake in the development strategy of the tool industry was its failure to respond effectively to technological innovation and international trends. China missed the opportunity to upgrade its tool product and service structures. After 20 years of reform and opening-up, the gap between China’s tool industry and foreign counterparts has not narrowed—it has widened.
In the 1960s and 1970s, Western developed countries completed their post-industrial phase and moved into high-tech sectors like information technology, biotechnology, and new materials. In this knowledge-driven economy, high-tech innovations transformed traditional industries, raising the standards for mechanical products and services.
Modern machining now demands tools that are highly precise, efficient, reliable, and specialized—known as the "three highs and one special." This contrasts sharply with the traditional approach of standardization, generalization, and mass production. Developed countries phased out outdated methods like the four-roller twisting process by the early 1980s and focused on upgrading to meet new industry demands.
This shift required significant investment in capital and human resources. China, however, missed the window for development. Weaker companies gradually lost their competitive edge and exited the market.
As a result, the growing gap between China’s stagnant tool industry and the rapidly advancing foreign industry is inevitable. Industry professionals often complain about weak markets and sluggish sales, but the real issue lies in an unadjusted production structure. According to data from 1998 to 2000, the import of cutting tools increased from over $40 million per year to more than $80 million, showing strong demand in high-tech areas.
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