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Viewing cable 05TAIPEI1233, TAIWAN TEXTILE INDUSTRY SEARCHES FOR
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Reference ID | Created | Released | Classification | Origin |
---|---|---|---|---|
05TAIPEI1233 | 2005-03-23 05:40 | 2011-08-23 00:00 | UNCLASSIFIED | American Institute Taiwan, Taipei |
This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS SECTION 01 OF 03 TAIPEI 001233
SIPDIS
STATE PASS TO AIT/W
STATE ALSO FOR EAP/RSP/TC AND EB/TEX
E.O. 12958: N/A
TAGS: KTEX ETRD TW
SUBJECT: TAIWAN TEXTILE INDUSTRY SEARCHES FOR
PROSPERITY
Summary: 2004 statistics show Taiwan's textile
industry remains competitive, with yarn and fiber
industries showing strong growth, while garment
manufacturers continue to move offshore in search
of lower costs. As downstream industries like
garment manufactures move, midstream manufacturers
doing cutting and dyeing believe they must move
with their customers. China is no longer the
preferred destination for some manufacturers, who
cite increasing restrictions on textile
investment, lack of reliable water and power, and
concerns about trade secrets and holding on to
good employees as reasons to look for other
attractive investment destinations. Left unspoken
are concerns about potential restrictions on
exports from China to the U.S. market, concerns
that Taiwan companies may be susceptible to
political pressures, and in some cases, a trace of
Taiwan nationalism. Vietnam is proving to be the
most attractive alternative, with several
companies already establishing operations and
others actively considering doing so. End
Summary.
Textile Performance in January 2005
-----------------------------------
¶2. According to Taiwan Customs statistics,
Taiwan's January 2005 textile and apparel exports
were USD 930 million, up 15 percent from the same
period of 2004. Yarn products performed best,
accounting for over two-thirds of total textile
exports, at USD 652 million. Yarn exports grew 18
percent compared to January 2004. On the other
hand, garment exports decreased by 4.7 percent to
just USD 97 million.
TTF Seminar- The Challenge for Taiwan
-------------------------------------
¶3. On February 24, 2005, The Taiwan Textile
Federation (TTF) hosted a seminar titled "The 2005
Quota Free Means World Trade Free. Is it
Challenge Free?" Over 150 people attended this
seminar. The keynote speaker was Mr. Chen Shou-
chung, Chairman of the Tah Tong Textile Co. Chen
predicted that Taiwan fibers and yarns would
become increasingly competitive while processed
products with large production runs, like simple
textiles and garments, would face fierce
competition from China and India.
¶4. In the current environment, with high energy
costs and a weakening U.S. dollar, Chen suggested
that Taiwan manufacturers should stop focusing on
cost-cutting and instead emphasize product
quality. In his view, Taiwan should be shifting
to small-quantity/high-quality textile commodities
with high value added. Chen also raised the
potential threat of Taiwan's economic
marginalization, noting an international trend
towards regional trade agreements that exclude
Taiwan. He said that in addition to China's
rapidly increasing production capacity in
garments, India, Turkey, Brazil and Pakistan are
improving textile production technology and
product quality.
¶5. In an effort to stay competitive, Chen
suggested that Taiwan textile firms should
strengthen marketing capabilities, launch
strategic alliances among up and downstream
suppliers and customers, and be aware of related
international regulations.
Up-Stream Expectations Positive
-------------------------------
¶6. Dr. Hong Huei-song, Chief of Consumer Goods and
Chemical Industries Division, Industrial
Development Bureau (IDB), said he believed that in
2005 Taiwan textile up-stream sectors, including
man-made fibers and fiber texturing products,
would remain internationally competitive, and
might grow by as much as 20 percent; he estimated
that mid-stream sectors, such as filament exports,
would grow based on projections that the garment
industry in China will grow rapidly in the post-
quota environment. This is expected to lead to
increased demand for filament production from
Taiwan. In the down-stream sector, Hong expected
Taiwan garment exports could fall by as much as
fifty percent in 2005. Garment makers in Taiwan
are increasingly finding that production costs in
Taiwan are too high. Those that remain for the
most part do so because they do not have the
resources to move overseas.
¶7. Hong commented that in addition to China and
India, Korea is a major competitor for Taiwan in
the textile industry due to similar levels of
industrial development. China and India produce
natural fibers while Taiwan and Korea emphasize
quality improvement of man-made fibers.
Taiwan Government Assistance
----------------------------
¶8. Official agencies including Ministry of
Economic Affairs (MOEA) Department of Industrial
Technology (DIT), IDB, Board of Foreign Trade
(BOFT) and Small & Medium Enterprise
Administration (SMEA) have allocated NTD 1.1
billion, NTD 1.4 billion and NTD 1.7 billion in
fiscal years 2005, 2006 and 2007 respectively to
assist textile manufacturers to: (1) establish
production lines globally, (2) promote company e-
commerce capabilities, (3) improve industry R&D
technology in an attempt to upgrade product
quality, (4) cultivate general textile expertise
through training and scholarships, and (5)
establish a good production environment in Taiwan.
Manufacturers Moving Offshore - But Not to China
--------------------------------------------- ---
¶9. Following the decision by Formosa Plastics
Group to develop polyester chips and nylons in
Vietnam several years ago, other industry leaders
are also establishing operations in Vietnam,
leading to a clustering effect. Leading garment
manufacturers such as Makalot Industrial Co. and
Roo Hsing Garment Co. Ltd. have already invested
there. Manufacturers in the mid-stream sectors
are also planning to move to Vietnam. Nan Yang
Dye/Finish Co. Chairman Ho Jun said that the dye
and finish factories have no choice but to follow
their customers in Taiwan's garment industry
offshore. His company plans to complete a
sizeable investment in Vietnam by the end of 2005.
Taiwan textile factories are forming complete,
integrated production lines in Vietnam.
¶10. Tainan Textile Co. now operates yarn-
manufacturing facilities in Vietnam with an annual
capacity of 300,000 spindles. Formosa
Petrochemical Corporation and Chung-Shing Textile
Co.'s Vietnam plants now produce 200,000 and
110,000 spindles of yarn, respectively. The local
press reports that these companies plan to expand
production capacity in 2005.
¶11. In a meeting between representatives from the
U.S. Import Administration and the Taiwan Textile
Federation (TTF) on March 3, 2005, Mr. Roland
Tsia, Chairman of the Formostar Garment Co.
SIPDIS
explained that in response to mainland Chinese
concerns about over-investment in the garment and
yarn sectors, China now discourages investment
from foreign companies in these down and mid-
stream sectors. China continues to welcome
investment in the "up-stream" textile industry
producing yarns and fibers. Tsai complained that
Chinese textile manufacturers are luring experts
and managers from foreign companies located in
China with extremely high pay in the first 2-3
years in an attempt to improve domestic expertise.
However, after improving the technical and
management skills of their domestic employees, the
Chinese manufacturers will abruptly decrease the
salary of these experts and managers in order to
drive them out. Tsai believes this is a concerted
business strategy to allow Chinese companies to
rapidly improve their competitiveness, to the
detriment of Taiwan experts and manufactures.
Comment: The world is bigger than China
---------------------------------------
¶12. Comment: Not surprisingly given the TTF's
close ties to the Taiwan government, none of the
participants in the February 24 seminar or the
March 3 discussion with TTF encouraged investment
in China. Manufacturers in Taiwan have long been
aware of the need to reduce costs to stay
competitive in the global textile market and have
seen offshore manufacturing as their only
recourse. Taiwan textile companies have been
investing heavily in China for several years in
search of lower costs and many tell us they will
continue to do so. But for some, China is clearly
no longer the only attractive overseas investment
destination. End Comment.
PAAL