Taiwan textiles face ASEAN challenge

Taiwan’s textile industry has consistently ranked among the top four earning industries for the island, but the signing of a free trade agreement among members of the Association of Southeast Asian Nations (ASEAN) could very well change this. As an excluded non-member of ASEAN, Taiwan is at a significant disadvantage - one which could put this US$13.6 billion industry (2008) in jeopardy.

Due to a limited domestic market, Taiwan-manufactured textile products have mostly been for export. Taiwan now ranks as the fifth largest textile exporter and the 31st largest apparel exporter globally. It is also one of the major suppliers of high-end man-made fabrics, according to the Taiwan Textile Federation. In order to stay competitive, it needs to be a party to the free trade agreements that are being inked by other Asian countries.

As an advanced economy, Taiwan’s labor costs have inevitably risen. According to Werner International, a management consulting company focused on the textiles industries, Taiwan’s labor costs for the textile and apparel industry were US$7.64 an hour in 2007, only slight lower than South Korea’s (US$7.77). However, this is no match for other emerging textile exporters such as Turkey (US$2.96), Thailand (US$1.75), Malaysia (US$1.34), China (US$0.85 for coast, US$0.55 for inland), India (US$0.69), Indonesia (US$0.65), Vietnam (US$0.46) and Bangladesh (US$0.28).

With growing labor costs and a strategy of getting closer to their customer base, Taiwan’s textile companies have gradually relocated to mainland China and Southeast Asia over the past decade. Initially they supplied mainly large scale ready-made garment manufacturers, but with the advent of ASEAN, Taiwan’s top firms are also outsourcing the more up-scale manufacturing with high technical barriers to entry. Some fear upstream contributors – synthetic fiber makers – will soon follow.

Taiwan began its textile industry by importing raw materials, processing them, and then exporting the finished products. Later it turned to using the materials derived from petrochemicals, and at the same time importing raw cotton and man-made staple yarn. Gradually it became vertically integrated in the whole production chain, including manufacturing of man-made fibers, yarn spinning, weaving and knitting, dyeing and finishing, and in the production of apparel and accessories.

Leaders in the textile sector see an analogy between Taiwan’s current relationship with China or ASEAN, and that with Japan in the 1990s. According to Taiwan Panorama, Taiwan replaced Japan as the cloth production center at that time and forced Japan’s textile firms to move more upstream to develop materials. Japan is now much more advanced in eco-textiles, one of the future trends in textiles. Also, Japanese companies can now break down recycled plastic bottles to make polyester chips - raw materials for chemical fibers, and are far more advanced in quality than Taiwan. With superior quality comes higher prices, and this is apparent when comparing the prices for super-fine fiber wipe cloths used in the semiconductor industry. Taiwan-made clothes costing NT$200-400 (US$6-12) per kilogram (2.2 lbs.) while those from Japan can reach NT$2,000 (US$62).

Taiwan needs to learn from the Japanese experience. The direction for future progress is not just in developing upstream materials in the production chain, but there is a lot of room for advancement in horizontal research and development. C.H. Hung, the CEO of Eclat Textile, the top supplier of knitted fabrics to Adidas and Nike, said Taiwanese have to develop new materials, new functions and new production techniques.

In order to keep Taiwan’s textile industry vibrant, Taiwan’s Ministry of Economic Affairs (MOEA) has created the Textile Industry Promotion Office (TIPO) in 2008 to draw up the blueprints for the future upgrading of the textile industry. Its aim is to turn Taiwan into a global production center for industrial textiles, functional textiles and fashion apparel with a goal of reaching US$17.8 billion in annual textile production by 2015. The MOEA’s policy is to focus on the transportation, manufacturing and healthcare usage of textiles.

Besides focusing on these key industries, emphasizes will also be placed on developing functional textiles, including sweat-absorption, odor-eliminating, and highly elastic fabrics, and clothing, luggage and tents that can be fireproof, bulletproof, translucent and provide solar power generation. These are very high-tech items with correspondingly high unit costs and prices, said Chiu Sheng-fu, director of the Department of Industrial Information and Services at Taiwan’s Textile Research Institute (TTRI).

Ten years ago, no one knew about the “light-fastness” or “wash-fastness” of fabrics, but now technology has advanced to the point of energy textiles and environmental textiles. Veterans in the industry are optimistic. As long as Taiwan can stay ahead of the curve by producing the next generation of textiles, it need not worry about traditional factories moving overseas.