Hong Kong-based Pacific Textiles Ltd is already one of the world's largest knitting manufacturers. Its vision, though, is to be "the market leader in the textile industry within the Asia Pacific Region" - no small challenge but one that it's embracing with gusto. Niki Tait visited the company from where she filed this report.

With an annual turnover of US$250 million in 2003, Pacific Textiles Ltd is Hong Kong's third largest knitwear company and in a similar league to its two slightly bigger competitors, Texwinca and Fountain Set. It is also one of the world's market leaders in circular knitting.

Led by chairman Mr Kin Chung Choi, this private company was established in Hong Kong in 1997 as a fabric manufacturer and trader. Its production base is situated 120km away in Panyu near Guangzhou, Guangdong Province, South China.

Here a new 335,000m² greenfield site has been established, housing 450 circular knitting machines and producing 15 million metres of knitted, dyed and finished fabric per month. The company has been growing rapidly since its launch and still has further capacity to fill within its plant.

US$100 million has been invested to date in land, building and machinery, covering knitting, yarn and fabric dyeing, finishing (including mercerising, sueding, brushing, combing, singing and compacting), and rotary and flat screen printing.

Situated on the coast, the factory has built its own wharf for the transportation of raw materials and finished products; there is a thermal power plant for electricity generation; and a water treatment plant.

Pacific Textiles has more than 4,000 employees, many of whom are textile industry professionals. Within the company living zone at Panyu, staff accommodation is provided along with a cyber cafe, restaurant, football and basket ball fields, banking and medical facilities and even a swimming pool.

PacificTextiles' 3000lbs jet dyeing machine

In terms of innovation, the R&D team has developed a variety of special fabrics such as those encapsulating fragrance and skin care finishes, anti-bacteria, anti-odour, UV protection, moisture management and micro fleeces, as well as the patented Hyrdro-Tech finish.

Currently all products are circular knits, with over 3,000 fabric specifications on offer including single jersey, crepe jersey, pique, interloop, fleece, terry, velour, vertical stipe, feeder stripe, auto stripe, rib, waffle, pointelle, interlock, mesh, herringbone, ottoman, and jacquard. The company has also started producing warp knits and sees this as a major area of expansion.

Cotton yarn comes from China, India, Pakistan, Indonesia, Thailand and Europe, with spun yarn mainly coming from Taiwan. Filament yarns come from Taiwan, Korea, Japan and Europe.

Technology leader
In terms of technology a variety of knitting machines are used. However, Pacific Textiles' main boast is its use of information technology which, it says, leads other players in the Asian market in terms of ERP (enterprise resources planning) systems.

Data is transferred through dedicated optical fibre and satellite networks, with a barcode system to manage physical distribution. Each business process is traceable through the ERP system from the procurement of raw material, manufacturing, quality control, warehousing to transportation.

Pacific Textiles' customers are mainly Asian investor companies around the world. 25-30 per cent of its fabric is turned into garments by Hong Kong owned factories situated within the Pearl River Delta.

Products made from Pacific Textiles' fabrics go to customers such as Gap, Old Navy, The Limited, Marks & Spencer, Fast Retailing, Sara Lee and Triumph.

In terms of final garment destinations, 75 per cent of the production goes to the USA, 5 per cent to Europe (mainly the UK's Marks & Spencer) and the rest to Japan and SE Asia. Europe is seen as a major growth area for the company.

Overseas expansion
Until recently, the company had no plans to manufacture outside its base in Panyu. However, there has been increasing pressure from some of the large US retailers who want to concentrate their fabric purchases with one or two companies to ensure product consistency, but for quick response want these companies to operate multi-location production, manufacturing fabric near to their garment manufacturers.

For a high capital investment company such as Pacific Textiles this option would not normally be regarded as cost effective. Keeping production under one roof, maximising labour expertise and the use of high technology means single location production is more attractive.

Circular knitting machines

However, in March 2004, Pacific Textiles acquired half of Textured Jersey Lanka. The other half of this joint venture company is owned by Linea Clothing (Pvt) Limited, itself a joint venture between MAS Holdings and Brandix Lanka, two of Sri Lanka's largest apparel manufacturers.

Currently 80 per cent of Textured Jersey Lanka's production is destined for Marks and Spencer, thus widening Pacific Textiles' exposure to Europe. The remaining 20 per cent goes to companies such as Next, Gap, Lane Bryant, and Victoria's Secret.

To date, US$25 million has been invested in the plant which is currently working at a 50 ton per week capacity producing knitted, dyed and finished weft knitted fabric. The infrastructure is in place to double output once extra machinery has been installed.

This offers a tremendous opportunity to Pacific Textiles as Sri Lanka currently imports 90 per cent of its fabric needs.

Chinese future
Pacific Textiles' main production base will, however, remain in China. The company originally set up there to take advantage of the low labour costs and abundant labour. But manufacturing costs are also comparatively low, and an impressive industrial infrastructure has been developing around the industry including road, rail, sea and air networks and transportation.

Textile machinery is now made in China and as the quality continues to improve, high technology becomes increasingly affordable, with spares and service provided locally. Quality yarn is increasingly available locally, as are labels, packaging and accessories.

In fact, the presence of the full package infrastructure and logistics network enables quick response delivery at a reasonable cost.

Paul Tsang, one of the directors of Pacific Textiles, says that in the mid-1990s the Pearl River Delta was the world's most rapidly expanding area as far as the textile and apparel industry was concerned.

Pacific Textiles' Panyu factory in China

Its proximity to Hong Kong, which is less than two hours away, attracted much Hong Kong investment. He explains that Hong Kong is seen as the gateway into China with its businessmen interfacing between western retail and Chinese manufacturing companies.

Indeed business has been eased further over the last couple of years by China's entry into the WTO. Rules and regulations are improving throughout China, it is an increasingly attractive country to do business in, particularly for the Hong Kong Chinese who speak the same language, share the same cultural heritage and understand the mainland protocols.

Tsang believes Pacific Textiles' success is due to the fact that the directors recognised the need to expand circular knit availability at a time when much of the industry was ignoring this sector.

The partners took a calculated risk: the Hong Kong property market was at its peak and new investments into textiles were few and far between. Pacific saw the opportunity, set up the right company, at the right place and at the right time, and had a lot of luck on the way.

Niki Tait, C.Text FTI, FCFI heads Apparel Solutions, which provides independent assistance to the apparel industry in the areas of manufacturing methods, industrial engineering, information technology and quick response.