A $27 million investment by Bell Bay softwood sawmiller Timberlink will increase employment, boost production and reduce electricity consumption.
The investment in three new technologies will take out bottlenecks in the production line and enable an increase of 50,000 cubic metres in throughput, Timberlink chief executive officer Ian Tyson said.
The investments include an improved packaging system, a grade scanner to improve utilisation and a more efficient kiln drying system.
Timberlink, which bought the mill from receivers of Gunns Limited seven years ago, processes several hundred thousand cubic metres of Tasmanian radiata pine sawlogs each year for structural timber.
Mr Tyson said Timberlink had increased employment from 140 in 2013 to nearly 200 people since buying the mill.
Timberlink sells about half of its output within Tasmania with the rest going interstate and for export. The business injects $150 million into the Tamar Valley economy every year.
The state and federal governments contributed to the technology boost.
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Mr Tyson said the investments included a federal government-funded state-of-the-art $3.5 million scanning system which would increase utilisation of the plantation grown timber.
"Basically everything in the tree is used because it's either used as building material, packaging pellets, crates, bark for gardens or fuel for boilers," he said.
"The investment means we can dry more wood, we can pack more wood and we can process it through the scanning equipment in the dry mill.
"Not only can we process more but we can get more value from what we process."
Mr Tyson said that the value of output would be lifted by about three per cent by the new technology with less product becoming residue.
"It's akin to turning sawdust into a solid that can be sold rather than a piece of waste," he said.
He said new technologies improved on the manual systems used in the past.
"Years ago people would manually look at a piece of wood and determine its strength properties and what needed to be cut and not cut," he said.
"Now technology does that through cameras and sensors and algorithms that run in the background at incredible pace hat understand what you are looking for, it looks at the pictures and what need to be recovered and what goes to waste."
Resources Minister Guy Barnett said the state government was pleased with its investment.
"The investment delivers a more sustainable industry and creates jobs," he said.
Mr Tyson said there was plenty of market demand.
"The challenge for us is to get more trees in the ground," he said.
"Plantations are a store of carbon and the product is sustainable and renewable and replaceable."