PIANOS: ECONOMIC AND COMPETITIVE CONDITIONS
Investigation No. 332-401 Publication 3196
Appendix E Text 3
Young Chang is one of the largest piano producers in the world, with the capacity in 1998 to build 135,000 pianos annually.The company also makes guitars, harmonicas, reed organs, and industrial woodworking machinery. Young Chang was founded in 1956 as a distributor of Yamaha pianos. Young Chang currently produces vertical and grand pianos in a highly automated integrated manufacturing plant in Inchon, Korea. Young Chang makes most of its own parts, including cast-iron plates produced at the company’s foundry in Inchon. Young Chang also produces much of the manufacturing equipment used at its piano factories.
In 1991, Young Chang invested $32 million in Young Chang America Timber, Inc., a lumber mill in Tacoma, WA, to ensure a reliable supply of spruce, maple, and other North American hardwoods for its factories in Korea Young Chang America’s headquarters was eventually moved from Cerritos, CA, to Lakewood, WA, a suburb of Tacoma. Young Chang’s North American research and development center is located in Waltham, MA. Engineering staff there develop technology for both Young Chang pianos and Kurzweil brand digital keyboard instruments.
In addition to exporting Korean-made Young Chang brand pianos to the United States, Young Chang also makes pianos for the U.S. and European markets under other brand names. Young Chang has made Cline brand verticals and grands for U.S. distribution by Cline Piano Company of Belmont, CA, since 1992. More recently, Young Chang has begun manufacturing Knabe brand pianos for U.S. distribution by Music Systems Research of Sacramento, CA.
For a number of years, Young Chang made Wurlitzer brand verticals and grands in Korea which were marketed in the United States by Baldwin Piano & Organ. The Wurlitzer brand pianos were reportedly identical in construction to their Young Chang brand counterparts. Baldwin eventually terminated its relationship with Young Chang, shifting Asian production of Wurlitzer verticals to Beijing Piano Group in China and Wurlitzer grands to Samick in Korea.
Until 1998, Young Chang made pianos for Nakamichi, Inc., of Hamamatsu, Japan. Nakamichi would install German-made hammers at their facility in Japan and make adjustments such as regulating and voicing, then export the pianos to the United States. These pianos were first sold under the Nakamichi label; the name was later changed to Nakamura.
Young Chang built a foundry in Tianjin, China, in 1988 to supplement its Korean production of piano plates. The success of the plate foundry, combined with rising labor costs in Korea and the large size of the potential market for pianos in China, led Young Chang in 1991 to invest $40 million in a piano factory next to its foundry in Tianj in.33 Young Chang began producing vertical pianos in November 1995 and grand pianos in December 1997 at the new integrated manufacturing complex. According to Young Chang officials, approximately 20 to 30 percent of the vertical pianos and 80 percent of the grand pianos produced at the Tianjin plant are exported to the United States. By comparison, 10 percent of the vertical pianos and 80 percent of the grand pianos produced at Young Chang’s Inchon facility are exported to the United States.
In addition to its own brand, Young Chang also makes Weber brand vertical and grand pianos in both Inchon, Korea, and Tianjin, China. Young Chang established Weber Piano Company in 1986 as an alternative brand for those U.S. consumers who prefer pianos with German or American, rather than Korean, brand names. Young Chang sold Weber to Samsung America Inc. in 1987, but still produces all Weber brand pianos. Weber pianos and Young Chang pianos differ only in the cosmetics of the cabinet styles.
Samick was founded in 1958 as a distributor of Baldwin pianos. The company started assembling vertical pianos from imported parts in the early 1 960s, The company now makes most of the parts it needs to produce pianos and is one of the largest piano manufacturers in the world. It is also the world’s largest producer of guitars.The company’s pianos have a variety of brand names. Pianos produced by Samick with the Samick and Kohler & Campbell labels are distributed by Samick’s wholly-owned U.S. subsidiary, Samick Music Corporation. Hyundai and Maeari pianos are purchased directly from the Samick factory in Korea by Hyundai and distributed by North American Music. D.H. Baldwin pianos are purchased from the Samick factory in Korea by Baldwin Piano & Organ and sold through Baldwin dealers. Samick also makes Otto Altenburg pianos for a piano dealer of the same name in Elizabeth, NJ; Bernhard Steiner pianos for a dealership of that name in Dallas, TX; Grinnell Bros. pianos for Hammell Music, a Detroit‑ area piano dealer; and Schultz & Sons pianos for a dealer of that name in New York City.
To establish a manufacturing presence in important foreign markets, Samick initiated assembly of vertical pianos in the United States in 1982 and China in 1986. Samick shifted assembly from its facility in City of Industry, CA, to Indonesia in 1998, however, when its supplier of cabinets, Kimball, quit producing piano cabinets in order to focus of its core furniture business. Samick continues to assemble relatively small quantities of vertical pianos at its facility in Harbin, China, for distribution in China and other countries in Asia. Samick officials report they the company has been disappointed with the quality and productivity of its workforce in China, as well as with China’s scarcity of timber resources. Samick also has found local government officials in China difficult to work with. Although Young Chang officials reported that the availability of timber resources was one of the reasons the company invested in a production facility in China, Samick officials indicated that the type of timber required to manufacture high quality pianos is in scarce supply in China.
In contrast to its experience in China, Samick officials report they are quite happy with their operations in Indonesia. Samick’s achievements producing guitars in Indonesia beginning in 1992 encouraged the company to establish a piano factory in Indonesia when Samick Music Corp. (USA) needed to develop an alternative supplier of piano cabinets. Samick found Indonesian workers easily trained and productive. There were abundant wood resources available in Indonesia, and some of the woodworking skills developed by the guitar production workforce could be transferred to the production of pianos. In addition, Samick already had a fully integrated woodworking plant in place.
Samick began producing vertical pianos in October 1996 and grand pianos in December 1997 at its Indonesian complex.45 Indonesian-assembled pianos combine keys, action assemblies, hammers, and piano plates made in Korea with soundboards and cabinets made in Indonesia, using production equipment moved from the California plant and additional manufacturing equipment from Korea.46 A wood indigenous to Indonesia, agatis, is used to produce soundboards for both pianos and guitars.47 The Samick complex in Indonesia has the capacity to produce 20,000 vertical and 4,000 grand pianos annually.48 Unlike the Harbin, China, plant, all of the pianos produced in Indonesia are exported, with most going to the United States. The synergy of producing both pianos and guitars in one location contributed to a reduction in Samick Music Corp.’s vertical piano costs, despite the higher transportation costs involved with final assembly in Indonesia, instead of California.
A bankruptcy reorganization completed in August 1998 reportedly allowed Samick to shift much of its production from high-labor-cost, high-overhead facilities in Korea to lower labor-cost, modern, and more efficient facilities in Indonesia. The company’s financial difficulties reportedly stemmed from an expensive diversification program that the company had embarked on in 1988. During the bankruptcy protection, the company shed all nonmusic subsidiaries and focused on the manufacture of musical instruments.
A Samick official reported that the company has had to “go upscale” with its production of guitars and pianos in Korea because the company’s Korean-made musical instruments could not compete in terms of price with its instruments produced in Indonesia.50 Improvements in the quality of Samick’s Kohler & Campbell brand pianos made in Korea were reportedly a factor in meeting requirements set by Steinway dealers, who sell Kohler & Campbell brand grand pianos. The Samick official noted that the increase in Samick’s U.S. imports of vertical pianos from its Indonesia plant have been offset by a decrease in imports of verticals from its plant in Korea.
Daewoo Precision Industries exported Sojin brand and private label pianos to the United States from 1980 to 1991. After Daewoo purchased a 33 percent interest in prominent German piano manufacturer Ibach, Daewoo replaced Sojin production equipment with copies of Ibach’s piano-making machinery. Daewoo now exports Korean-made Ibach brand vertical and grand pianos to Canada, but not to the United States.
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