Back to the Roots

Written by Peter Li-Chang Kuo

(Chinese)

When water dries up at the source, all things decline;

When trees lose their roots, no saplings can be planted.

When beams and pillars tilt, palaces and terraces collapse;

When mountains lose their foundation, soil can no longer bear them.

When heaven and earth lose balance, they cannot last long;

When the sky has nothing to tether, those stars will change.

Yet with steel molds, life force remains;

Guarding the “mother of industry,” the nation can be renewed.

The ancients said: “The sage deals with matters through non-action, and teaches through silence. All things arise through him and he does not refuse them; he gives them life but does not possess them; he acts but does not rely on them; he accomplishes but does not claim credit. Because he does not cling to achievement, his influence endures and does not fade.” (Guan Jiao II)

This means that a true governor does not deliberately overthink, nor cling to rigid judgments of good or evil. By aligning with nature and avoiding forceful interference, he manages the affairs of the people. Through his own conduct, he influences all beings. And because he is selfless and without desire, all things operate naturally. Thus, the nation prospers, yet he neither claims the merit nor shifts the blame — so his influence is lasting and never disappears.

In the 1970s, Taiwan’s “activist government” nearly destroyed the island — just by a single decree: “the prohibition of private steel mills from producing mold steel (also known as tool steel).”

Molds are called "the mother of industry." They are the most central and crucial tools of industrial production. Especially in mass manufacturing, molds improve efficiency, ensure quality, reduce cost, enable customization, and promote sustainable industry by conserving resources, reducing pollution, and facilitating recycling.

Due to these characteristics, molds made of “special steel” have become the cornerstone supporting the booming manufacturing industry. They are an indispensable core tool in industrial manufacturing and play a decisive role in improving production efficiency, product quality and reducing costs. They are one of the most important tools in modern industry.

Because of these traits, molds became the foundation of modern manufacturing. Yet the government, for the sake of a single state-owned enterprise — CSC, forbade the private sector from producing special steels in 1972.

Today we often hear that Taiwan faces bottlenecks in industrial transformation. This inevitably recalls the “activism” of past officials, whose policies cast shadows across centuries. For example, the recent “drone-mania” sparked by the Russia–Ukraine war — Taiwanese firms receive orders, only to find that even basic bearings must be imported. The sole reason: Taiwan cannot produce the required steels — such as “AISI 52100, M50, or Cronidur 30,” which demand ultra-high purity, ultra-low oxides and sulfides, and non-metallic inclusions controlled at the ppm level. These advanced bearing steels are all beyond reach—because of "Chiang Ching-Kuo’s 1972 Steel Ban."

When I received news of the Steel Ban, it felt like a blade had pierced my chest — I nearly collapsed. Mr. Ishi shook his head again and again, sighing: “The government is truly killing us! If we're forbidden to make tool steel, how can Taiwan’s industry go on?” But Chiang Ching-Kuo, determined to create a state-owned enterprise (China Steel, CSC), pressed ahead, even at the cost of killing the whole private industry. The "Steel Ban" must be counted among his most foolish acts.

A few of us who depended on tool steel convened urgently and decided to import “SKD-grade steels” from Japan, and also sought supplies from Germany. When the Japanese shipment arrived, I tested it myself. With a diameter 1 mm drill bit, the cut was no smooth; one slip, and the drill snapped. It was nowhere near as good as Mr. Ishi’s steel.

At that moment, I realized: Taiwan’s homegrown special steels were actually superior to Japan’s. Had Chiang issued the "Ban" just a few years earlier, Taiwan’s economic miracle would never have happened!

Later, in 1979, while developing "satellite receivers" in the United States, I visited NASA and was stunned to see “my precision eyelets” — the ones I had produced for AVNET Inc. back in 1966. These tiny components had become one of the key elements that helped America surpass the Soviets in the space race.

Fig 1: Super-fine Eyelet made by Li-Chang Kuo in 1966

In November 1966, when the Americans came asking for eyelets, they gave me only a dimension. Two days later, I handed them real samples, along with detailed “Approval Sheet” (a document has become a classic model in the electronics industry) meeting every single requirement.

Fig 2: A-Chang, 13-year-old made a precision mold with his bare hands

The crucial step was when I told Mr. Ishi: “The mold must be machined with a 0.8 mm drill, and after quenching, the surface hardness must reach HRC 60, while keeping the core tough.” He carefully skimmed off the slag from the molten steel and precisely adjusted the ratios of carbon (C), chromium (Cr), molybdenum (Mo), tungsten (W), vanadium (V), cobalt (Co), and nickel (Ni).

Once the steel was milled flat, I worked on an old drill press. The 0.8 mm bit slid smoothly, drilling through 3 cm of steel with ease. I successfully built a "progressive deep-drawing punch die" — 10 cm long, with nine processing steps — that produced the world’s first precision eyelet meeting the “PTH” standard. This achievement not only revived my struggling family but also gave birth to Taiwan’s precision industry.

Fig 3: Drill press similar to the one used in 1966

If the Republic of China had left the UN in 1965, and Chiang Ching-kuo had become Premier in 1966, then in his push for a “Great Steel Mill,” had he issued the "Steel Ban" six years earlier — my comeback story would never have happened. Nor would K. T. Li’s success with the Kaohsiung Export Processing Zone (KEPZ). Nor would the precision eyelet, enabling the PTH concept and Apollo 4’s flight, ever have existed. America might have lost the space race.

Just six years earlier — and the entire story would have been erased. And so too, perhaps, the later scandals of a corrupt dynasty.

In the 1970s, beyond the Steel Ban, I was even summoned by the Taiwan Garrison Command over "phosphor bronze." They questioned me half a day, until they were exhausted, one officer stared at me blankly and forced a show of authority: “You… you… must report to the Industrial Bureau — to officials who actually understand.” The harassment was severe. Taiwan’s achievements today were not built by those who enjoyed the fruits of others’ labor without toil.

I once advised Chiang Ching-Kuo: “Stop the Steel Ban!” But it was in vain. After January 13, 1988, I continued to urge Lee Teng-hui. A Mr. Su even phoned me, asking about its importance. Yet to this day, Taiwan’s special steel industry still lags far behind Japan’s—and even trails China’s. No wonder bearing makers had no choice but to set up factories in Zhejiang.

Fig 4: Bearings necessary for precision machinery

Development after the “Post Steel Ban”

After the 1972 Steel Ban, Taiwan’s private steel industry was forced to shift — some turning to rebar for construction, while users of specialty steels like myself had no choice but to rely on imports. The entire domestic supply chain for specialty steels was broken. Although President Lee Teng-Hui later adopted my advice and allowed some relaxation, Taiwan has remained dependent on Japan and Sweden for high-grade materials.

Although the turnover for the steels required in precision bearings is not large, they are indispensable for all precision machinery and molds, multiplying their value a thousand fold for the nation. For example, in 1964 we started a small NTD 10,000 mutual-aid group at the Yamuliao Market, building an automated machine that produced “precision eyelets that no one came to buy.” But when opportunity arrived, I used that same machine to complete an urgent NTD 100,000 order within five days, clearing $90,000 in net profit. That not only at not only paid off debts owed to Yamuliao Market but also allowed my family to enjoy our very first prosperous Lunar New Year in 1967, and to purchase land to build our first house. From there, the foundations of Taiwan’s precision industry were laid.

Fig 5: A progressive die to earn net profit NTD 90,000 in Dec. 1966

A small piece of tool steel can bring enduring benefits to families, society, and the nation. Tragically, Chiang Ching-Kuo’s authoritarian "Steel Ban" killed the entire specialty steel industry. His reward was to elevate CSC (China Steel Corporation) into Taiwan’s so-called “steel champion,” but CSC focused on low-end products such as "building materials, plates, stainless steel, and general alloy steel"—never entering the domain of high-purity, low-oxygen specialty steels, and its contribution to precision manufacturing is very small.

Aerospace-grade specialty steels — such as AISI 52100 (high-carbon chromium bearing steel), M50 (high-speed bearing steel), and Cronidur 30 (nitrogen-strengthened stainless bearing steel) — require "vacuum melting, electroslag remelting (ESR), and vacuum arc remelting (VAR)." Taiwan has never had complete production lines for these. This predicament arose from the arrogance and ignorance of those in power. From 1972 until today, the damage continues — with no end in sight.

After years of persistent lobbying, I finally persuaded President Lee. In 1993, the International Automation Machinery Exhibition held at the World Trade Center; same year, Evergreen Group invested in Gloria Material Technology Corp.(GMTC), producing "SK and SKD tool steels." Today, the company lists capital stock of "NTD 4.667 billion" and possesses integrated capacity from steelmaking, ESR and VAR secondary remelting, forging, rolling, heat treatment, to finishing. It produces stainless steels, tool steels, high-speed steels, and HSLA steels — over 200 types in all.

Yet, high-end bearings require AISI 52100 or M50. Many argue Taiwan’s domestic demand is too small to support a full-scale high-grade bearing steel plant. Consequently, even Taiwan’s largest specialty steelmaker with NTD 4.667 billion capital lacks the refining capability to stably produce AISI 52100, M50, or Cronidur 30.

Taiwan's demand for semiconductors is also limited, but an online search of TSMC's capitalization, which is of concern to top leaders, shows "NTD 259.3 billion." In comparison, this shows the extent to which the specialty steel materials industry is being neglected.

President Lee once asked:

“How large is the market value of TES, your invention?”

Answer: “Ten trillion US dollars.”

Asked again: “How much of that could Taiwan capture?”

Answer: “3.8 trillion US dollars.”

Upon hearing my explanation, he replied: “Then I am reassured — Taiwan knows where to go in the 21st century.”

During the COVID-19 pandemic, TES’s "cashless system" alone reached an annual transaction volume of "USD 36 trillion." A company using our invention increased revenue by USD 200 billion. At just 1% of licensing fees, the intellectual property (IP) share would be "USD 2 billion" —around NTD 60 billion. With founding a “Steel Laboratory” such resources invested into developing high-purity steels — with ultra-low oxide and sulfide inclusions controlled to the ppm level — Taiwan could finally grasp the critical tools for achieving a "USD 3.8 trillion GDP."

In 1963, I received a copy of "The Biography of Edison." It described how, late in life, Edison studied "Botany" and—curiously — "iron ore," as though he sensed a hidden treasure within. I too felt this mystery.

Starting in 1964, I often searched the mechanic parts in Wanli, Tainan, puzzled by how foreigners could produce such reliable bearings and universal joints that allowed me to assemble automated machines so smoothly. Later, in exploring "applied materials," specialty steels became my priority. But the Steel Ban shattered that plan.

I came to realize specialty steel development required social responsibility investment (SRI). That is why in the 1990s I devoted myself to completing the "TES" new tech-economic system, which later, from APEC 1997–2009, to make it became one of the 21st century’s most important industries. I hoped its massive profits could finance Taiwan’s “steel dream” — building upon a foundation that could sustain development for another 50 years.

An investment of at least "USD 2 billion" into iron ore research — on the interactions of C, Cr, Mo, W, V, Co, Ni — could not only solve expansion problems in my "power chip" but also develop high-grade bearing steels, and even novel aerospace materials far beyond toolmaking.

For instance, experimental loitering munition drones made in Taiwan often failed at high speed: propeller motors can spin at 10,000–30,000 rpm. Using ordinary industrial bearings — with lower precision and poorer temperature tolerance — leads to fatigue spalling, cage fracture, or lubricant carbonization.

In short, Taiwan cannot produce qualified high-speed drones because it lacks "high-grade bearings and the materials science" behind them. The absence of high-grade bearings stems from the absence of ultra-clean specialty steels and precision processing systems capable of eliminating the“microcrack → spalling → catastrophic failure” sequence.

The Steel Laboratory I propose would research these issues — just as Mr. Ishi once "skimmed slag from molten steel" — to develop methods to reduce impurities (oxides, sulfides), producing finely crystallized, stress-free steels with no brittle edge spots. Such steels enabled Taiwan’s precision eyelets to once surpass those of the US, Japan, and Germany. Tomorrow’s high-grade steels could do the same — expanding into all industries, from daily life to aerospace and defense.

Conclusion

The ancients said: “All under heaven has a beginning, which is called the Mother. Once the Mother is attained, the children are understood. Knowing the children, one must return to the Mother — thus life will never be in danger.”

This means that everything has an origin — "the Mother." Returning to it allows us to understand and safeguard all things. To see the “tiny point” is wisdom; to guard the fragile is true strength. Applying this principle, a nation can avoid harm and instead prosper.

"Molds are the Mother of Industry," and “molds derive from specialty tool steels.” If we invest in this foundation with an unlimited mind, the nation will flourish.

High-end drones rely on advanced bearings, made from high-carbon chromium bearing steels (SUJ2, 100Cr6, AISI 52100), or more advanced ultra-clean steels such as M50, M50NiL, 440C, produced through VAR, VIM, or powder metallurgy (PM) — beyond the reach of simple ESR refining. These require big investment in small niche, high-end markets — but they lead industries to their peak.

By returning to the Mother — the foundation — we can create boundless transformations, gaining an edge in high-speed, high-precision, continuous, automated production that repeatedly yields high-value products for new and diverse markets. Therefore, I believe only through social enterprises and SRI can Taiwan reverse decline and secure the foundations for its future.

Peter Li-Chang Kuo, the author created Taiwan's Precision Industry in his early years. Peter was a representative of the APEC CEO Summit and an expert in the third sector. He advocated "anti-corruption (AC)/cashless/e-commerce (E-Com)/ICT/IPR/IIA-TES / Micro-Business (MB)…and etc." to win the international bills and regulations.

【Copyrights reserved by Li-Chang Kuo & K-Horn Science Inc.】

External Links:

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