Taiwan's domestic textile firms are making all-out efforts to distance themselves from rivals in developing nations by focusing on high value-added products to give them a competitive edge. Eclat Textile and Chang-ho Fibre are two companies that have used this new focus to attract international customers.

Despite the gloomy outlook painted by official figures, which indicate a 17 per cent decline in textile exports in 2001 and a 12.4 per cent drop in total production value, Taiwan's textile makers remain optimistic about the future.

Eclat quality control department

The textile and clothing sector is still the country's second-biggest export earner after semi-conductors - bringing in US$12.4 billion in 2002 and providing jobs for 230,000 people - and as such it is one of three industries singled out by the government as having the greatest potential for development. As part of its '2008 National Development Plan,' for example, financial and administrative assistance is readily available and investment into research and development projects is increasing by around 20 per cent each year.

The domestic decline of the textile industry has accelerated over the last two decades. High wages - the average textile employee earns US$941 a month, ten times more than a worker in mainland China - as well as a lack of branding expertise and increasing competition from other Asian countries have all contributed to the problem.

First to move out was the garment industry, followed to a lesser degree by the upstream fibre, spinning and weaving industries

But Taiwanese companies are also fighting back. Many have done this by relocating or extending their business interests into neighbouring Vietnam, South Korea, Thailand, the Philippines and mainland China where they too can take advantage of cheap labour, particularly in high volume product areas.

Piece dyeing in Taiwan
Research and development hub
What remains on home turf, however, is a base for the production of the highest quality and most technical products - particularly value-added fabrics - and the hub for most major strategic decisions, research and development programmes, quality control, and logistics.

And it is here that companies can call on the country's legacy in manmade fibre production, dyeing and finishing, its skilled labour, high technology and capital investments to help give them a competitive edge.

One company that began the shift overseas in 1988 is fabric manufacturer Eclat Textile Co Ltd, which in 2002 saw its pre-tax profit grow by 14.46 per cent to US$3.35 million.

Founded in 1977 and listed on the Taiwan Stock Exchange in 2001, this vertical manufacturer mainly produces knit fabrics and garments, specialising in polyester nylon, cotton, viscose, Lycra and spandex products for activewear, ready-to-wear and intimate apparel. But unlike many Taiwanese textile firms who have tended to equate offshore with mainland China, Eclat has been more ambitious - extending its sales and production interests to Hong Kong, Los Angeles and New York.

Today the firm has over 2000 employees. Fabrics are knitted, yarn-dyed and piece-dyed in Miao-Li, Taiwan and Wu-Xi, China, while garment production takes place in Taiwan (450,000 pieces per month), China (350,000 pieces) and Los Angeles (300,000 pieces).

Customers include Express, The Limited, Nike, Adidas, Mango, Target, Liz Claiborne, Nike, Reebok, Puma, Victoria's Secret, Dillards, Macy's, Jones New York, Marks & Spencer, Next.

Added value

Eclat textile testing centre
Dyeing and finishing have particularly important roles to play in adding value to fabric. But stringent environmental regulations, mainly on waste water treatment, make it increasingly difficult - and expensive - to set up plants overseas. In Taiwan the regulations are no less strict, but the bonus is that the infrastructure is already in place.

The country also offers its manufacturers a flexible local supply of raw materials. In 2001 Taiwan was ranked as the world's third largest producer of manmade fibres (3.02 million tons) and was placed second in terms of polyester fibre (2.37 million tons), polyester filament (1.53 million tons) and nylon filament yarn (393,421 million tons).

These strengths are now being called on to help businesses make the most of new global opportunities, and challenges, that are coming through as a result of Taiwan's recent accession to the World Trade Organisation. Lower import tariffs and new openings in the European and American markets are just two of the benefits for quality and reliable suppliers, although they are offset to a certain degree by increasing competition from other WTO member countries like mainland China.

But in either case Taiwanese textile companies are convinced that the best way forward is through product differentiation.

"As long as we increase our core competence we don't worry too much about 2005", explains Eric Ying, vice president of Taiwan Stock Exchange-listed fabric maker Chang-ho Fibre Corp, one firm that has chosen to concentrate its research and development efforts on the production of higher value-added fabrics. He also believes that "if you can offer products that no-one else has you are less susceptible to price pressures."

Eclat's fashion collection
The company has already accepted that change is necessary for survival and growth, and first embraced this idea around nine years ago when it added apparel fabrics to its line-up. Until then it was a world leader in materials for artificial flowers, with a 70 per cent market share; today 90 per cent of its annual US$44 million turnover is in textiles but it also has interests in home textiles, and makes and distributes its own Sheen-Tech branded dyeing and finishing machinery.

The move into apparel fabrics has brought an impressive roster of clients, including global leaders such as Reebok International, Adidas, Nike, Victoria's Secret and Calvin Klein. In fact, 60 per cent of its products are sold for export, but instead of shipping it directly to these companies, Chang-ho sends the fabric to garment makers, who then sell the final products to the multinationals.

Fashion and function
Although Chang-ho offers a range of conventional polyester and nylon fabrics it has also invested in a number of innovative projects to combat the competition. Five years ago Chang-ho was the sole DuPont agent in Taiwan, handling Lycra, Coolmax, Supplex, Cordura and Aquator products, but now it is focusing on its own combinations of function and fashion.

One such development is the use plasma surface modification technology, a finishing technology using oxygen, to produce wicking and quick-dry fabrics used in sportswear and outdoor wear.

"Its performance is better than other products on the market," Ying says. "It's also a permanent treatment, does not affect colour shade change or hand feel, and because we use oxygen it's also very cheap and environmentally friendly." This process could be 30 per cent cheaper than that used by its rivals, Ying added. Chang-ho is now applying for patents for its plasma technology in both the US and Taiwan.

Easy Movement fabrics from Chang-ho
The company is also exploring nanotechnology, micro-encapsulation of fragrance and antibacterials, and has also developed anti-mosquito coatings.

"Some customers know what they want," Ying says, "but around 50 per cent want to see ideas or have a concept they need fulfilled. For example, a customer might want outdoor jackets that are water-repellent for a certain number of washes; Chang-ho can provide the fabric to suit depending on the end-use and price."

Expert Analysis

Natural and Man-Made Fibres in China, Hong Kong and Taiwan: Forecasts to 2005
Chinese production of cotton has fallen, but man-made fibre output is soaring. This in-depth study looks at the availability of raw materials used in the manufacture of man-made fibres, and provides comprehensive data on man-made fibre productive capacities and production by plant and fibre type. Production and capacities are forecast out to 2005. Find out more here.

 

The fabric maker's production lines currently are all located in Taiwan, but rising costs at home have forced it into its first overseas venture - a dyeing and finishing plant in Zhejiang province in eastern China. Weaving, printing and laminating are still based in Taiwan where the company has invested heavily in automated machinery and is buffered from fluctuations in the labour market.

In the longer term, though, Chang-ho hopes to globalise and vertically integrate its operations through acquisitions, including garment plants in the Philippines, Thailand, Indonesia or China.

But the decision to move offshore is one that can't be taken lightly. As Ying explains: "If we moved everything to mainland China, the skill level of local staff would not be able to meet our needs."

He adds: "After 2005 I would like to see Chang-ho becoming an international textile holding company. We are currently still a very local company, and this is one reason why we accept so many technologies from abroad."

By Leonie Barrie