Technology is Korea’s
Trump Card
China may have the best prices, but advanced R&D is keeping Korean mills in the textile game.
By Ernest Kao & Sabrina Kim
Even in R&D intensive Korea, textile and apparel manufacturers have fallen victim to a shrinking domestic market, intense price competition and a lack of export channels, according to exhibitors at this year’s Preview in Daegu trade fair.
Korean yarn and fabric companies have gained respect over the years for their innovation in the textiles industry. Big names such as Hyosung and Kolon are no stranger to Asia’s textile manufacturing scene. Taking the lead in product differentiation, unique pattern making, intricate detail and high-quality, stock is produced in small volumes compared to other big textile players in the region, notably China, Taiwan and Japan, but nonetheless able to pack a decent punch in the synthetic fiber and textile market. However, it seems to be that the problem for Korean producers lies with this ‘small volume production’ strategy.
“[The industry is] still fighting with price issues. Besides, for some of the basic products, the prices of our major products remain quite high. The main reason for this is due to our small manufacturing volume,” said Dong Ok Kim of The Scene of Korea, a Korean OEM mainly exporting to China, Japan, USA and Europe.
Persistent Price Pressure
Global trade is still struggling in the recovery process and price continues to dominate buying decisions for most companies. The truth is, current demand for Korea’s innovative, but expensive exports remain under pressure from market conditions. That’s the same for countries like Japan who have been losing out to high-volume, lower-cost competitors such as China who reap large economies of scale and cluster industries.
“The quality and technology development of Chinese products is still far behind that of Korean products,” said S.T Park, CEO of Sungan Textile. “Because of this, Korean products are in a good position for the China market. But in the long run, Chinese products are still more competitive because of price in the international market and are fast developing their quality standards.”
The paradox Korean textile producers are facing is that their most uncompetitive feature is actually also their most competitive one, and upholding it will be crucial to keeping them afloat. Jung Yu Jin, assistant manager of strategic marketing for the Hyosung Corporation, believes that Korean textile manufactures still possess some competitive advantages.
“Korea has its strengths in producing filaments, Taiwan has its strength in textiles, Japan’s products are just too expensive,” Jung said. “[Korea] does not have price competition with China because we don’t manufacture the same goods. We don’t do regular products but only special products. Our technology makes us much more competitive than China.”
Like many other companies Hyosung has also moved some of its manufacturing base from Korea to China. However, the move was carried out to cut costs for producing more ‘general products’ whereas special, functional products requiring more complex production procedures remain in Korea. Even Chinese manufacturers have the urge to gain some inspiration from the Koreans. A group of Chinese visitors from fabric companies arrived at PID with no intention of placing orders. Instead, they were there to better understand Korean fabric products and technology.
No Place Like Home
As a matter of fact, the bulk of the traders at PID were actually companies based in Korea. Actively looking for life in Korea’s sunset textile industry, some companies have found that selling domestically may actually hold more prospective, again, due to high prices now unacceptable to overseas buyers. “We exported to China and Hong Kong five years ago but we can’t do that anymore due to the high prices,” said Young Man Kwon, president of Chinbi Trading Co. Ltd. The company has been importing yarn for 13 years and Kwon himself developed a new yarn five years ago establishing a patent and a brand called ‘Silkland’. “Domestic sales have been increasing steadily…mainly due to the online shopping mall mania,” Kwon points out. “But price is still a significant factor affecting us in sourcing export markets.”
Searching for export channels has been difficult for Korean fabric manufacturers. The lack of export roots is holding back Korean companies from market expansion. The ability of the Koreans to develop good-quality synthetic fibers and complex textiles may be superior to foreign companies but a strategic know-how of information sourcing, trading knowledge of the newest trends, marketing and display techniques remains scant, said Sera Kim, chief of textile information and research for Fashion Center Korea (FCK).
The government-supported FCK provides an ‘essential index function’ and full consulting service for domestic textile companies looking to expand their business. For the PID, they selected 22 of their 60 member companies to exhibit at the fair. Going forward, helping Korean companies sell into overseas markets will be a key initiative which needs to be secured if the industry is to remain competitive. Small companies are increasingly facing big challenges such as the shrinking domestic market and difficulties finding export channel due to the low volumes. Some companies have even sought to go into mass production to reduce the costs and prices.
China Challenge
Competition from Chinese manufacturers may be pricing Korean companies out of the market but Korean companies are also finding that the Chinese market also holds some opportunity for them too. The Korean-based Shin Heung Corporation (Monotex) has been exporting to China for the last 10 years. Shin Heung specializes in shape memory textiles and the company has been moving out of the chronically depressed Korean market to ride the wave of China’s growing economy.
“We had a buying office in Hong Kong at the beginning but as the export volume to China become huge, we moved office to Shanghai,” says Clous Jung, manager of Shin Heung’s exporting department. “The company runs the business in China through a Korean-Chinese agency for distributing, so it has been quite easy to expand our channels.” Jung stated that the company is receiving more orders than last year.
For Korean exporters, price competition is an inevitable problem. Chinese companies may be pushing Korean companies out of their own country but on the other hand, the Chinese market is also providing them with new demand for quality products.
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