Machinery and metalworking industry in Turkey
Machinery manufacturing continues to be among the key growth drivers of the Turkish economy. This sector plays an important role in the development of Turkey’s manufacturing industry mostly thanks to its capability to provide intermediate goods and inputs to other key sectors such as construction, energy, textiles, agriculture, and mining.
The machinery manufacturing sector in Turkey is known for being R&D intensive, with over 450,000 engineers graduating annually, while at the same time the sector is infamous for creating high value. The local sourcing accounts for approximately 85% of all inputs at the production level.
The production value in the Turkish machinery industry was estimated to be around USD 18,8 million in 2011 according to data by the Turkish Statistical Institute TurkStat. The sector is dominated by construction and mining machinery (16%), machinery tooling (15%), air conditioners and ventilation (12%), general purpose parts and equipment (6%), motors and turbines (6%), industrial washing and drying (5%) and pumps and compressors (5%).
Turkey exports machinery to a fragmented set of countries mainly in the EU, with Germany, England and France having the top three cumulative export amount for the past five years. In 2012, the country’s machinery export market was valued at USD 21 billion. Overall, the manufacturing industry of Turkey has grown significantly since the economic crisis in 2009. From 2007 to 2012, machinery exports grew by a CAGR of 7%. The country’s Investment Support and Promotion Agency has revealed that the target export volume of machinery is USD 35,1 billion by 2018 and USD 100 billion by 2023.
Enterprises and employment
The number of enterprises in Turkey’s machinery sector has not changed drastically, but the number of employees has overall increased. According to the governing authority of the Turkish social security system, in 2015 Turkey had 9319 active machinery manufacturers employing more than 135 thousand people.
These manufacturers are mostly SMEs with a flexible working style; 85% of the enterprises had less than 20 employees and only 39 companies had more than 250 employees. 40% of the companies have revenues between USD 0,66 million and 30 million, whereas 10% of companies have more than USD 30 million revenues.
Machinery production is mostly concentrated in organized industrial zones and smaller scale industrial zones. The production sites show a preference for areas with strong support structures, such as access to raw materials, skilled workforce, transportation and end markets. While the Marmara and Aegean regions are dominating the machinery production, recently growth rates in the other regions have surpassed them.
Foreign and domestic investments
The total foreign direct investment (FDI) flow into Turkey increased from USD 8,5 billion in 2005 to USD 15,9 billion in 2011, which represents a 11% CAGR. The sector’s 64% p.a. growth in FDI inflow from 2005 to present day has made machinery manufacturing a major growth driver for overall manufacturing FDI.
Both domestic and foreign investments are foreign in the country, with the latter contributing to 33% of investments and 21% of job creation for the period 2012-2013. In 2013, out of 239 total investments in the machinery sector, 22 were made with foreign capital.
The top two investments in the country for 2013 overall were made with foreign capital - these were the TL 214 million investment for solar cells and panels manufacturing given to Solarvan Gunes Enerjisi ve Ekipmanlan Uretimi ve Sanayi Ticaret, which also created 150 job positions; and the TL 38 million given to BSH Ev Aletler Sanayi ve Ticaret for the modernization of home appliance manufacturing.
For the previous year a total of 308 investments were made in the sector. Out of those, 20 were realized with foreign capital, including the top three investments for the year overall. These were the TL 195 million that Vestel Elektronik received for the modernization of electronic devices manufacturing; the TL 118 million for Bosch Rexroth Otomasyon to modernize and expand their product portfolio; and the TL 90 million that Turk Traktor ve Ziraat Makineleri received to manufacture agriculture tractors.
Steel and metal forging capabilities
Turkey’s Investment Support and Promotion Agency points out the strong steel, metal forging and casting industries as another strong supporter of the country’s machinery production. Steel production capacity reached 50,1 million tones in 2012. The large amount of material produced conveniently provides raw material to the machinery industry.
The top four metal forging companies in the country have a total capacity of nearly 80 tons per year as of 2010. At the same time, metal casting production has increased by 36% p.a. since 2009 and reached nearly 1,4 million tones in 2012; during that time, the industry was composed of 962 casting facilities where 33 thousand people were employed.
Machine tools production
The term "machine tools" describes a comprehensive range of machinery used for cutting, removing or forming metal for the production of components which are later on assembled into engineering products. In the most simple definition, machine tools can be described as "machines that produce machines".
Some of the most significant subsectors of this industry include the manufacture of motor vehicles, aerospace products and general industrial equipment. These sectors, together with the subcontractors who supply such products, compose the client base for machine tools. Machine tools production is usually viewed as a strategic sector for each country - in 2013 alone, the top 28 countries’ production of machine tools amounted to 68,7 billion dollars.
In Turkey, machine tools production started in the mid 60s with the manufacturing of lathes by private companies. The process was initiated by first signing licensing agreements with two world famous machine tools manufacturers. Turkey underwent a series of national industrialization efforts which made state institutions a driver of the machine tools industry expansion. After a significant period of time the efforts gave results and the first Turkish-made machine tool appeared on the market in 1984.
The next several years had various machine tools (such as universal/turret turning lathes, universal/vertical milling machines, cylindrical/surface grinding machines, tool grinding machines, radial grinding machines etc.) in large scale production within Turkey. This same period coincided with the first introduction of CNC machining centers to the world market. Industrial manufacturers from the country and abroad all demanded these hi-tech, computer controlled machine tools.
According to Turkey’s Ministry of economy, the Turkish machine tools industry has been able to meet this new demand since the beginning of the 90s. The process of producing better, innovative machine tools with modern technology has been an ongoing effort among machine tools manufacturers in Turkey since.
Currently, when it comes to machine tools Turkey relies on Turkish-made production almost entirely. Worldwide statistics for the year 2013 reveal Turkey is the 13th largest manufacturer among 28 machine tool manufacturing countries, with a production value of USD 709,2 million, quotes the Turkish Ministry of economy.
The official data also states that 32% of the total comes from metal cutting type machining centers and the remaining 68% is from metal forming type machine tools. During 2012 Turkey was the 16th largest manufacturer among 28 machine tool manufacturing countries and its production value of USD 644,2 million. The Turkish machine tools industry partially meets domestic demand and nearly 66,5% of its production in 2013 was exported.
Today, the various kinds of machine tools are produced and exported within the country. Turkey’s Ministry of Economy lists the following product groups as most popular and demanded: CNC/conventional milling machines, CNC/conventional machining centers, CNC/conventional lathes, CNC/conventional grinding machines, bending machines, honing machines, bordering machines, presses, shears, press breaks, CNC brakes, CNC cutting machines, profile cutting machines, welding machines (MIG-MAG, TIG-WIG), band saws, seaming machines, planning machines, thicknessing machines, rip saws, resawing machines, trimming machines for stones, CNC/conventional gear hobbing machines, spindle molding machines, corner notchers, calibrating and polishing machines, chamfering machines for stones, splitting machines, log carriages, dust sucking machines, parts and components of machines tools (electronic components, computer controls, CNCs, NCs, cam switches, tool holders, chucks, load lifting magnets, magnetic chucks, mandrels, hydraulic cylinders and spare parts, bar feeders for CNC lathes, tooling dies, universal frames/cabinets, CNC cabinets, work benches, material cabinets, tool cabinets etc) and other metal, stone, glass, wood and plastic processing machines.
In 2014, official government data accounted for a large amount of SMEs working in the machine tools industry and sub-industries of Turkey. These companies are characterized by having less than 200 employees. About 10 of the companies within the sector are large-scale manufacturers of machine tools and parts. The most populated regions for manufacturing sites are the Marmara, Central Anatolian and Aegean regions of Turkey. Istanbul, Bursa, Konya, Izmir, Ankara and Kayseri are the biggest cities accommodating machine tools and components production.
Machine tools exports
The Turkish machine tools sector exports its products to about 170 countries around the world. The largest export destinations are the Russian Federation, USA, Germany, Brazil, Canada, Poland, Saudi Arabia, Iran, Azerbaijan, and Iraq. The country’s machine tools manufacturers are precise about following international developments in quality, safety and the environmental aspects of production. Additionally, since EU technical harmonization has been required, at the beginning of 2002 it became necessary to fulfill CE Mark requirements in order to sell products within the Turkish domestic market.
Construction machinery market
Turkey’s investment agency claims that in recent years, the country has seen growth in local demand that has surpassed the in-house sales growth - both locally produced and sold volume. As a result of this imports have increased.
The construction machinery market in 2012 was characterized by a demand if about USD 2 billion, with a 37% p.a. increase since 2009 and the financial crisis. Nearly 50% of this demand is met via imports. The local demand for construction and by extension for construction equipment is driven by demographic changes, public sector plans (like urban transformation initiatives, infrastructure investments), and a regionally active contractor base.
Suitable ground for the construction machinery industry is provided by the already established manufacturing facilities of automotive OEMs and presence of local construction machinery manufacturers. Generally, Turkey is seen a suitable investment environment for this particular product segment, since it lacks local sourcing of mini equipment. Investments in small-sized construction equipment have lower capital needs and offer growth opportunities for global players, especially those still recovering from the 2008 recession.
Local corporations have an already developed know-how for the production of small-sized construction equipment and are successful in supplying the market demand in Turkey. Investment Support and Promotion Agency predicts that the assembly capabilities, particularly well developed in the automotive industry, and incentives for R&D activities in the country might make Turkey an attractive hub for post-recession growth by providing assembly and technology development services to satisfy the increasing regional demand and competitiveness in the sector.
Agriculture machinery market
In 2011, the Turkish market for agriculture machinery was valued at about USD 1,3 billion, dominated by tractors production. Official data reveals that in 2012, the exports within this sector were USD 521 million, growing by 15% p.a. since 2007. Out of those, tractors accounted for 63% of exports. However, despite their strong export performance, Turkey has a trade deficit that is mostly due to the great imports of harvesting, planting and fertilizing machinery.
Several government grants are active for the agriculture machinery, aiming to replenish the inventory of machinery in the country and increase agricultural GVA. In recent years, local production of silage machines and straw or fodder balers have gained momentum. The increased demand for such machinery is correlated to the strong bovine animal, sheep, and goat stocks together with new players entering the market. At the same time, already established and strong local within the agricultural spray and powder dispersers subsectors offer increased capacity to meet the sizable regional demand.
The increasing demand for small agricultural machinery (e.g. tractors) locally and in the region due to small farm sizes, especially North Africa and Middle East, gives Turkey an opportunity to use its unused capacity and become a regional hub for this type of machinery.
Food processing machinery market
The Turkish food processing market is driven by high consumption of packaged food and beverages amounting to around TL 75 billion. Several big multinational food companies (Unilever, Kraft, Nestle) have a traditionally strong presence in Turkey and use the country as an export base, at the same time constantly investing in it.
Turkey’s Investment Support and Promotion Agency values the food processing machinery market at USD 900 million, with exports and production amounting to about USD 381 and 376 million respectively. Within it, the leading categories are packaging machinery (35%), machinery for grains (18%), bakery for biscuits (16%) and filtration and purification (8%). About 110 local producers are operational in this fragmented market. Nearly TL 209 million of local investments were realized since 2011, which were mostly concentrated in locations in the Marmara and Central Anatolia regions.
Major advantages when it comes to food processing are Turkey’s logistics and market proximity for global confectionary and biscuit, cake and bread bakery players, as well as players offering food processing equipment with heat exchange technology. Turkey could appear attractive to many globally leading equipment players implementing a production footprint strategy - Chinese companies in particular can use Turkey as a gateway to regional markets in Europe, Africa, and the Middle East.
Specific equipment parts that are not locally sourced but are in high demand present opportunities for profitable parts supply investments; examples of such parts are heat exchangers, ball-bearing, electrical automation and control systems, pneumatics, filtering and compressors.
Data from: TURKSTAT;
Investment Support and Promotion Agency.
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