13 Feb 2019
Taiwan's Rebooted Textiles Sector Set to Benefit Hong Kong Businesses
With Taiwan's reengineered textiles sector set to take a lead in the global functional fabrics segment, there may be a number of collaborative opportunities for Hong Kong businesses on the distribution, branding and promotional fronts.
From the 1960s until the mid-1980s, the textile sector was one of Taiwan's key industries. Some 30 years ago, though, this all began to change, with many manufacturers relocating their textile operations to mainland China or elsewhere in Southeast Asia, a move driven by rising labour costs and increasing environmental concerns among Taiwanese consumers.
In a bid to remain viable, the textile companies still manufacturing in Taiwan looked to upgrade from merely processing imported materials prior to re-exporting them to an operational model that focused more on innovation, R&D and the development of 'functional' fabrics – materials designed to meet specific performance requirements. Largely on account of the wider utilisation of such fabrics within the mainstream fashion industry, Taiwan's textile sector subsequently enjoyed something of a revival.
Today, Taiwan's textiles sector largely focuses on three primary activities – the manufacture of man-made fibres, fabric production and garment manufacturing. More generally, according to a report recently published by the Taiwan Textile Federation (TTF) – An Overview of Taiwan's Textile Industry – companies in the sector specialise in both upstream and midstream operations. With Taiwan having gradually upgraded from its previous labour-intensive industrial base, many of its downstream garment makers are now located overseas, though they remain the driving force behind the domestic sector's upstream and midstream operations.
According to figures released by Taiwan's Ministry of Economic Affairs and the TTF, as of the end of 2017 there were 4,383 textile manufacturers in Taiwan. Of their overall production value of NT$375.2 billion (US$12.17 billion), 94.6% (NT$355.1 billion) was derived directly from the textiles segment, while only 5.4% (NT$20.1 billion) stemmed from the downstream garment segment.
Rewinding back to 2005, there were 4,858 textile manufacturers in Taiwan, representing a combined production value of NT$498.9 billion. As well as the fall in the overall number of manufacturers, this indicates a 25% drop in production value over the 12 years to 2017. According to current indicators, this contraction is ongoing.
Given the limited size of the domestic market, exporting has always been the lifeblood of the Taiwanese textile sector. In 2018, the export value of Taiwan's textiles industry was US$10.08 billion, a year-on-year increase of 0.02%, while the value of its textile imports increased by 9.3%, reaching US$3.68 billion. This represented a trade surplus of US$6.4 billion, a 4.6% year-on-year decrease, though still the fourth-largest trade surplus recorded by any Taiwanese industrial sector for the year in question. Compared with 2005's export value of US$11.83 billion and consequent trade surplus of US$9.2 billion, the scale of the continuing decline is more than apparent.
Essentially, the territory has been obliged to stop trying to compete directly with the low-cost clothing production facilities of mainland China or Vietnam. Instead, it now focuses on midstream and upstream R&D, innovation and material supply operations. In terms of the global textiles industry chain, this has seen it successfully transition from producing finished low added-value garment products to playing an intermediary role in the manufacture of items with a higher added-value.
In addition, a number of Taiwan's textile businesses have looked to exploit the rising global demand for fast-fashion and casual wear. In order to facilitate this, the use of eco-friendly renewable technology has been made a priority, with the government, the academic sector and the industry itself having invested heavily in functional textile-related R&D in recent years. This has seen a number of the territory's manufacturers added to the sourcing roster of several global brands, including Adidas, Nike, Under Armour, Uniqlo and Victoria's Secret.
As a sign of the territory's success in this regard, at a number of recent global sporting tournaments – including the football World Cup, the Olympic Games and the Asian Games – the environmentally friendly kit worn by many of the participating athletes was frequently sourced from Taiwan.
In many cases, Taiwan's success has been down to its ability to refine and further develop existing functional textile technology. A case in point here is shingosen, a range of synthetic fibres developed by Japanese manufacturers in the 1990s, which were said to be the first functional textiles to incorporate infrared thermal and quick-dry functions. Initially, although the product was well received, its high cost resulted in disappointing sales.
Subsequently, though, the technology was taken onboard by several of Taiwan's leading chemical fibre textile manufacturers, including Nan Ya, Formosa Plastics and Far Eastern. From 1998 onwards, this saw the three companies invest heavily in the further development of shingosen. As a result, a new, more cost-effective generation of the fibre has come to be widely used across an array of functional clothing, with its properties proving to have genuine benefits with regard to protection from bacteria and radiation, as well as from UV / electromagnetic sources. Its moisture-absorption / quick-dry capabilities and cooling function have only further added to its ubiquity.
Apart from such innovations, the transformation of Taiwan's textile sector also provided the opportunity for the development of a comprehensive industry chain. This saw the emergence of a raft of midstream / upstream manufacturers of fibres, yarns and woven fabrics, as well as several dyeing / finishing process operators, including Far Eastern New Century, Tainan Spinning, Formosa Taffeta and Everest. Over the same period, the downstream garment segment came to be dominated by three sizable players – Makalot, Eclat and Hakers Enterprise.
With the functional textiles market continuing to mature, this has also triggered the further evolution of Taiwan's textiles industry, a change that has had repercussions for government and academic bodies, as well as for the industry itself. As an indication of how fundamental this change is likely to be going forwards, according to MarketsandMarkets, an India-based revenue impact analyst, smart textiles are set to succeed smartphones as the next area of explosive high-tech growth. Confirming this expectation, San Francisco-headquartered Grand View Research estimates that smart textiles will enjoy a compound annual growth rate in excess of 35% for 2016-2024, resulting in an ultimate market valuation of $9.3 billion.
In order to fully capitalise on the sector's growth potential, particularly with regard to the increasingly elderly average demographic in many developed economies, the TTF has recommended that the industry focus on developing healthcare / lifestyle products, prioritising such factors and facilities as comfort, sensor incorporation and smart interpretation capabilities. In order to deliver on this, it is also calling on textile manufacturers to work closely with their counterparts in the semiconductor and biomedical sectors, two of Taiwan's other pillar industries.
It has also been widely recognised that Hong Kong could play a key role in the future of Taiwan's textiles sector. In particular, it is thought that Hong Kong's expertise in the fields of production control, sourcing and textiles / clothing trading could see the two former rivals able to strike up a series of useful collaborations over the near term.
This would likely focus around three mutually beneficial objectives. Firstly, Hong Kong is still the region's preeminent textiles import / trading hub and is already the fourth-largest export destination for Taiwan-origin textiles. Secondly, Hong Kong remains the leading platform for Asia's textile sector, with events such as the HKTDC Hong Kong Fashion Week remaining an essential showcase for Taiwan's functional fabrics output. Thirdly, while Taiwan is seen as a little lacking on the branding / marketing front, these are areas where Hong Kong's service sector is seen to excel.
Overall, assuming traditional rivalries can be put to one side, the resurgence of Taiwan's textiles sector should prove to be good news on either side of the Strait. While both Taiwan and Hong Kong have been obliged to reinvent themselves, to varying degrees, by changed economic and technological realities, the functional fabrics business is seen as just one example of where the complementary strengths of these two territories can be harnessed to the mutual benefit of both parties.
Robert Kang, Special Correspondent, Taipei