With Boeing's current struggles and no clear turnaround in sight, Taiwan's aerospace supply chain is increasingly looking to "domestic defense autonomy" as the primary driver for market growth. Taiwan's aerospace supply chain representatives recently revealed that the aerospace industry's challenges are having a cascading effect on the machine tool sector, as aerospace suppliers purchase machine tools for manufacturing and processing.
Boeing has faced a series of manufacturing issues with its aircraft. In February 2023, a new Boeing 737 Max was forced to make an emergency landing due to a system failure on its maiden flight. In November 2023, a newly delivered 737 Max operated by United Airlines experienced engine failure at high altitudes. On January 8, two more Boeing 737 flights encountered problems while traveling between Japan and Guam.
Boeing's Production Woes Impact Global Supply Chain
As a result of Boeing's manufacturing quality issues, production has been restricted. The US Federal Aviation Administration (FAA) has expanded its oversight of Boeing, and the company has strengthened its internal controls. Data shows that Boeing's deliveries in the first quarter of 2024 dropped to 83 aircraft, a 36% decrease compared to the same period last year.
Industry insiders reveal that "when Boeing encounters problems, many factories may collapse, and even those that survive will face operational impacts." The significant reduction in Boeing's production means delays in aircraft deliveries and shipments, adversely affecting the entire supply chain.
Taiwan's Aerospace Industry Shifts Focus to Domestic Defense and Space Sectors
While Taiwan's overall aerospace sales have continued to reach new highs in the past year, the proportion of exports most closely related to international aerospace companies has fallen from about 80% in 2019 to about 50% recently, according to statistics from the Ministry of Economic Affairs.
Industry experts believe Taiwan's aerospace supply chain can achieve growth despite Boeing's headwinds by diversifying its customer base. This includes increasing orders from domestic defense autonomy policies and gradually expanding revenues from space-related projects.
In contrast to Boeing's 36% year-on-year decline, Airbus has reported an 11.8% increase in deliveries due to normal operations. Boeing's challenges, including reduced shipments to China due to U.S.-China tensions and quality control issues, have left Airbus dominating the market.
While some Taiwanese aerospace suppliers are part of the Airbus supply chain, industry sources reveal that Airbus has been gradually filling the gap in the Chinese aerospace market left by Boeing. By adopting Chinese suppliers to secure more orders, the benefits to Taiwanese companies from Airbus's growth have been limited.
Boeing has been outperformed by Airbus in annual deliveries for five consecutive years, with the Chinese market playing a crucial role in determining global aircraft manufacturing leadership.
Despite these challenges, Taiwan's aerospace sales continue to reach new heights. This suggests that Taiwan's aerospace supply chain has established a solid foundation for growth. If Boeing can return to normal operations and resume pulling orders, Taiwanese companies may see another peak in their business performance.
