Heaven Rewards Diligence

Written by Peter Li-Chang Kuo

(Chinese)

Transistor's Tape Recorder won the American's orders;

In 1972, storms arose to disturb our first revival.

The Steel Ban severed Taiwan’s living path,

Chiang Ching-Kuo’s autocracy wounded all creation.

The people, in self-rescue, carved out new roads,

Steel flowed like secret troops through Chen Cang.

A revolution in precision craftsmanship brought new life,

Unsealing the dust of years, to guard and lift the future.

“Heaven rewards diligence, Earth rewards kindness, Humanity rewards sincerity, Business rewards trust, and Industry rewards precision.” This ancient wisdom applies perfectly to the Taiwanese people. It was precisely because of such values that, even amidst “internal strife and external threats,” Taiwan managed to stand firm through the sheer strength of its people.

The year 1972 was pivotal. Taiwan’s industries had just clawed their way out of the nightmare of 1969, when vacuum tubes were phased out. After repeated failures, local entrepreneurs finally succeeded in developing "transistor tape recorders" and secured orders from the U.S. Every component required a mold, and molds required special steel.

Just when everyone thought the prince and princess could live happily ever after, the newly appointed Premier Chiang Ching-Kuo issued an astonishing ban: “All private steel mills are forbidden to manufacture or sell special steels.”

For us ordinary folk who needed molds and tool steels every single day, the "ban" was catastrophic. We had no choice but to rush to Japan for emergency supplies—only to discover that Japanese SKD tool steels were far inferior to our local products.

Ironically, I even had to list out improvements for Japanese suppliers, helping them upgrade their products. In doing so, I inadvertently fueled their expansion and eventual global dominance.

The bitterest irony: soon after Chiang came to power, Japan rewarded him with the "severance of diplomatic relations." At that time, the “cash crop” of Taiwan’s economy — the transistor tape recorder — had only one real competitor: Japan. The Japanese behaved oddly. When we had no business, they would politely visit. But once we secured orders and turned to them for purchasing materials, they would hike prices or cut off supply without hesitation. Taiwan’s industries survived as if licking blood from a knife’s edge. Yet Chiang, in his push to establish CSC (China Steel Corporation)—which even in 2025 still produces only "low-grade steel plates" —effectively destroyed Taiwan’s private special steel makers and handed Japan an unfair victory in the electronics race.

But we were not crushed! We knew that “only if Taiwan prospers do our lives have value.” Industry must thrive for the economy to thrive, and only then can Taiwan stand strong. Thus, Taiwan could not collapse—it had to become stronger. By 1974, Chiang himself came to see what we were doing in this so-called “precision industry revolution.”

In 1972, I developed a product called the “Yoke” (pronounced Yòu Kè). Transistor tape recorders required loudspeakers, which in turn required a yoke. The yoke, together with the voice coil and magnet, formed the magnetic circuit that enabled sound production.

When current flowed through the coil, by Fleming’s left-hand rule, it generated force perpendicular to both the current and magnetic field, causing the coil and diaphragm to move, reproducing the audio signal as sound.

Fig 1: Loudspeaker and its Yoke

The yoke is the magnetic conductor, concentrating and guiding magnetic flux through the coil to maximize efficiency. It was indispensable.

We produced yokes from "pig iron." First, we cut pig iron into small blocks (like taro balls), pressed them into cylindrical blanks with steel dies, then machined the inner bore on a lathe to fit the coil, and finally supplied them to speaker manufacturers.

Through the hard work of grassroots craftsmen, Taiwan overcame the quicksand of vacuum tube obsolescence and set foot on the new path of transistor tape recorders. The phrase “Heaven rewards diligence” proved true once again, with each yoke order starting at one million pieces.

Pig iron, with a carbon content of 2.11% to 4.3%, contains silicon, manganese, phosphorus, and sulfur. It is hard, wear-resistant, but brittle — not ideal for forging. Yet its excellent magnetic properties made it suitable for "yokes," especially given its low cost. Combined with our breakthroughs in die-making technology, we were able to launch products quickly, proving the ancient saying: “Industry rewards precision.”

For tool steels, I worked with Mr. Ishi, whose steels could withstand over 100,000 production cycles. Professor Ma Cheng-Chiu of National Cheng Kung University analyzed the reason: “The carbides were fine and evenly distributed, and inclusions (especially oxides and sulfides) were minimal.” This gave the steel the ability to surface-harden to HRC 60+ while retaining core toughness.

By contrast, Japanese SKD steels (e.g., SKD11, SKD61) failed miserably. At HRC 60 they cracked after only a few pressings; at HRC 58 they deformed within a few thousand cycles. Professor Ma’s conclusion: “Japanese SKD steels, being JIS-standard equivalents of German DIN or American AISI grades, were not optimized for high-speed mass production of yokes.”

* SKD11 ≈ D2 tool steel: high carbon, high chromium → coarse carbides, wear-resistant but brittle.

* SKD61 ≈ H13 hot-work steel: good heat resistance, but poor impact toughness if not processed properly.

Because these were “standardized steels,” they were not tailored for the unique demands of Taiwan’s yoke stamping industry — hence their shortcomings.

Meanwhile, Mr. Ishi’s “small-furnace smelting” resembled vacuum melting or refined batch smelting. Small-scale, artisan-controlled processes ensured high purity, fine carbides, hardness, and toughness. By contrast, Japanese steels were likely mass-produced by "electric arc furnaces" (EAF), with higher gas content, more inclusions, and uneven grains—hence brittle and inferior in toughness.

Extending the Life of Steel Dies for Yoke Production

To prolong the lifespan of steel dies used for stamping pig iron into yokes, we employed a "silicate softening agent." Pig iron pieces, cut into small blocks (about the size of taro balls), were soaked in the solution overnight before pressing. This improved machinability and structural stability, reducing some of the shortcomings found in Japanese steels.

The key distinction between Taiwanese and Japanese special steels lay in the production method. In Tainan, Mr. Ishi practiced "small-furnace smelting with meticulous manual control." He carefully skimmed off slag floating on the molten steel—something impossible for Japan’s mass production methods. As a result, Japanese special steels contained stress-concentrating spots within their grains. When quenched to HRC 60, they became brittle; when tempered to lower hardness, they quickly lost durability.

During the 1970s, lifestyles in Taiwan changed dramatically. Beyond hard labor, people began to enjoy leisure—especially "watching television" after work. Electronics firms such as National, Sampo, Sanyo, and Tatung assembled TV sets, with sales increasing by over a million units annually. Televisions thus became another Taiwanese “cash crop.”

The "cathode ray tube" (CRT) of TV sets required a yoke as well. The coil and yoke generated magnetic fields that controlled electron beams scanning across the fluorescent screen to form images. This made the issue of die steels even more critical.

However, after I provided Japanese suppliers with technical improvements, the unintended consequence was severe: American competitors shrank drastically, and even German companies could not rival Japanese firms. Ironically, Chiang Ching-Kuo’s “Steel Ban” forced me into becoming an inadvertent accomplice in Japan’s victory in the special steel battle.

Looking back:

1) December 1966. After working day and night, I finally satisfied the requirements of an American client and won my first major order. Professor Yao Ching-Po of National Cheng Kung University’s Electrical Engineering Department remarked: “We could only help translate your 'Approval Sheet' into English, yet you managed to endure such a long process and actually win a NASA order!” For me, it was simply about securing a decent life for my family. This touched the principle of “Earth rewards kindness”, which in turn brought me access to Mr. Ishi’s custom steels for mold-making.

2) 1969. The good times lasted barely two years (1967-1968). My American client told me: “Vacuum tubes are obsolete. Let's brace for impact!” Many local clients exited the race, leaving only the most stubborn survivors. After repeated failures, we stumbled upon a breakthrough: "the transistor tape recorder." Jewish buyers from New York honored their word with large orders, allowing Taiwan’s economy to survive even after the Republic of China was expelled from the UN.

Yet few could understand why, just after taking office as Premier, Chiang Ching-Kuo would issue an order “banning private steelmakers from producing and selling special steels.” To this day, China Steel Corporation (CSC) only produces hot-rolled and cold-rolled sheets that we in the industry dismissively call “little iron”—ordinary plate that hardly qualifies as real steel.

Had we sat and waited for death — letting mold steel supplies be cut off — Taiwan’s economy might have collapsed. The consequences can be analyzed as follows:

1. Taiwan might never have built a complete electronics supply chain:

1) With almost “blacksmith-style innovation,” we forced our way into making world-class molds and components, enabling U.S. firms to secure NASA contracts — leading to the success of the Kaohsiung Export Processing Zone (KEPZ), which drew more international buyers to Taiwan.

2) Because we could produce everything from mold steels to electronic components domestically, Taiwan had the transistor tape recorder industry that carried the economy in the 1970s, paving the way for the IT industry of the 1980s.

3) Had this chain been severed, Taiwan would have become merely a subcontractor to Japan, with no qualification even for OEM assembly.

2. The export market would have been entirely dominated by Japan:

1) At the time, Taiwan’s main export competitor was Japan. Without us "stubborn oxen” (Taiwanese) fighting to make products, U.S. orders would have gone entirely to Japan, locking Taiwan out of the global supply chain.

2) Even if Taiwan’s industries had managed to “survive,” they would have been forced to live off Japan’s crumbs. But Japan was clearly betting on Communist China’s future, which could have killed Taiwan’s export-driven economy at birth.

3. Without foreign exchange and industry, no “economic miracle” could have followed:

1) In the 1970s, transistor tape recorder exports were Taiwan’s lifeline. Without our resilience through "Steel Ban" and material shortages, Taiwan might have suffered the fate of the Philippines — stuck in agriculture or low-level manufacturing.

2) Without foreign exchange, there would have been no infrastructure, no universal education, no cultivation of scientific talent. Barely able to feed ourselves, we certainly could not have “donated” huge sums for Chiang’s "Ten Major Construction Projects" — which would have collapsed into nothing but castles in the air.

4. The “Taiwan Paradigm” might never have emerged:

1) Later generations praised Taiwan’s “flexible, hard-fighting SMEs.” In reality, this reputation was forged because we survived under the harshest conditions of the "Steel Ban."

2) Actually smuggling special steels was illegal. Nevertheless, had we chosen to sit idle, we would have been wiped out, and Taiwan might have been locked permanently into low-level subcontracting and agricultural exports. Cases like the “Banana Disputes” would have replayed endlessly, reducing Taiwan to a third-rate economy.

Question: “If we hadn’t endured back then, would Taiwan still exist today?”

Answer: “There would be no Taiwan as we know it today.”

Taiwan has survived to the present only because ordinary citizens — caught in the "triple squeeze" of destructive national policies, Japanese exploitation, and exclusion from international markets — relied on superior technical skills and unyielding perseverance to preserve the island’s industrial supply chain. Precisely speaking, the true foundation of Taiwan’s so-called economic miracle was not China Steel (CSC), but the private-sector networks of special steel and mold-making that ordinary people managed to keep alive.

Conclusion

In 1972, Taiwan’s production of special steels and mold-making suffered a major policy shock, rooted in complex historical and economic contexts. At the time, Taiwan was transitioning from vacuum-tube to transistor-based electronics. The "transistor tape recorder," as a model new industrial product, required large quantities of reliable special steel molds and components. Unfortunately, in 1972 the government issued a "ban" prohibiting private steel mills from producing or selling special steels. As a result, the industry was forced to import materials of tool steel from Japan — through illegal smuggling at first — creating a state of heavy dependency—like drugs.

Under Chiang Ching-kuo’s administration, policy focused on building a state-owned giant: "CSC" (China Steel Corporation), established in 1971. Its aim was to reduce dependence on foreign steel and promote heavy industry. Ironically, CSC primarily produced low-grade steel plate and not special steels. By restricting private steel mills to safeguard the monopoly of the state-owned firm, Chiang’s policies inadvertently destroyed Taiwan’s existing special steel producers.

This chapter of history is little known in Taiwan today. The main reason is that the narrative of CSC as a “Ten Major Construction Projects” success story was celebrated, while the sacrifice of private special steel industries was erased. Both the government and mainstream media deliberately avoided discussing this policy failure, as it reflected poorly on official decision-making. Yet on the ground, where "one day felt like a year," private industries engaged in self-rescue and survival. Chiang Ching-Kuo himself may never have realized that his "Steel Ban" nearly destroyed Taiwan.

Consequently, private industries making molds were left “at the mercy of Japanese suppliers,” who wielded price manipulation and supply-cut threats like weapons, forcing Taiwanese manufacturers into a life-or-death struggle. The situation grew even more severe in 1972, when Japan severed diplomatic relations with the Republic of China, while Taiwanese transistor tape recorders became Japan’s direct competitors. Japanese firms repeatedly applied pressure by controlling access to these critical materials.

It cannot be denied that research into "Taiwan’s Industrial History" remains insufficient. The stories of private steel mills—driven to collapse by restrictive policies—have not been incorporated into mainstream accounts of economic development. The core contradiction of Taiwan’s 1970s steel policy was this: on one hand, massive investments were poured into CSC to strengthen the state-owned monopoly; on the other hand, the development of private special steel industries was suppressed. This left critical supply-chain links still reliant on Japan, exposing Taiwan to risks that persist even today. Even though the 1972–1973 crisis was one of the most significant events for Taiwanese industry, it remains little understood due to the mixed record of policy outcomes.

Had Taiwan failed to weather the 1972 shock to its special steel sector and the resulting supply-chain breakdown, the foundations of both electronics component manufacturing and mold-making would have been gravely undermined. The path to economic takeoff could have been derailed. Without enduring those hardships, Taiwan’s industrial upgrading and export expansion — the very forces behind the "Taiwan Miracle" — might never have materialized. Taiwan could have faltered during the oil crises of the 1970s, failed to establish science parks, and missed the rise of high value-added industries.

Thus, while the policies of the time inflicted heavy damage on private special steel mills, the crisis simultaneously revealed the resilience of Taiwan’s grassroots forces. It validated the ancient saying: “Heaven rewards diligence. Earth rewards kindness. Humanity rewards sincerity. Commerce rewards trust. Industry rewards excellence.” Only by surviving such severe trials could the foundation of Taiwan’s modern industrial development be secured.

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.】

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