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The Evolution of Textile and Apparel Industry in Asia

1

Dr. Gordon YENExecutive Director & Chief Financial Officer

Global Supply Chain

Major cotton

suppliers

Major yarn

spinners &

fabric mills

Major garment

manufacturers

Major

retailers

Global Supply Chain

Major cotton

suppliers

Major yarn

spinners &

fabric mills

Major

retailersMajor garment

manufacturers

Global Supply Chain

Major cotton

suppliers

Major yarn

spinners &

fabric mills

Major garment

manufacturersMajor

retailers

Global Supply Chain

Major cotton

suppliers

Major yarn

spinners &

fabric mills

Major garment

manufacturersMajor

retailers

Global Supply Chain

Major cotton

suppliers

Major yarn

spinners &

fabric mills

Major garment

manufacturersMajor

retailers

2000-2011: Domination of China

The World’s Largest Exporter

of Textiles and Apparels

2001

Officially Joins WTO

2005 Abolition of

Textiles Quotas

Stage 1: Domination of China

16.913.510.510.38.76.65.41.9T & AExports

Vietnam

25.8%27.5%2.5%18.0%31.4%22.8%184.2%N/AChanges

4.13.12.53.02.72.72.20.6T & AExports

21.516.913.412.09.79.87.64.3T & AExports

Bangladesh

27.2%26.2%11.7%23.3%-0.7%29.2%76.7%N/AChanges

22.1%14.0%-1.0%9.2%6.0%8.0%43.7%N/AChanges

India

29.424.121.121.319.518.417.111.9T & AExports

Cambodia

20.1%23.7%-9.8%8.2%18.9%25.2%117.0%N/AChanges

China

Changes

T & AExports

(in US$billions)

24.7%

206.5

2010

-19.0%

167.0

2009

12.9%

185.2

2008

19.0%

144.0

2006

0.6%

171.2

2007Year 2000 2005 2011

53.0 115.0 248.0

N/A 266.7% 33.3%

Notes: T&A refers to Textile & Apparel(Source: World Trade Organization)

2012 & After: Rebalancing in Asia

Industrial development• Improvement in infrastructure

• Industrial zone

Currency against USD / EUR

Cost of labor

Inflation

Trade policies; Duty policies

Improvement in skills and quality

2012 & After: Rebalancing in Asia

All changes are based on comparison over the same period in 2011* Data of India is up to Jun 2012; Data of Cambodia is up to Jul 2012

9.20%2,362*Cambodia7.80%11,524Vietnam

-12.4%5,250Thailand0.50%14,207*India

-10.4%8,151Pakistan0.70%15,296Bangladesh

-8.1%8,461Indonesia-0.8%162,186China

ChangesJan - AugRegion/CountryChangesJan - AugRegion/Country

Exports of Textiles and Apparels in 2012(in US$ millions)

(Source: Official statistics from different regions)

2012 & After: Rebalancing in Asia

India

- Cat 341

W/G COT. SHIRTS/BLOUSES,N-KNIT

Textile & Textile &

ApparelApparel

Industry in Industry in

AsiaAsia

Specialization in Asian countries (based on US Imports)

2012 & After: Rebalancing in Asia

US Imports of 2010 / 2011 / 2012– Cat 341 W/G COT. SHIRTS/BLOUSES,N-KNIT(Quantity)

(Source: Office of Textiles and Apparel, US Department of Commerce)

in ‘000 Doz

Year

12,863

7,184

4,210

316 343 176

1,154

2,548

1,8952,515

4,069

5,594

2,595

1,217

2,368

1,4461,075

716

0

2,000

4,000

6,000

8,000

10,000

12,000

2010 2011 2012

China

Bangladesh

India

Indonesia

Vietnam

Sri Lanka

Notes: Data is up to Aug 2012

Unit Price in US$/Doz

59

72

72

42

53 55

66

76

7872 817949

7758

92 56 101

Confirmed Leadership

Behind China

2012 & After: Rebalancing in Asia

IndiaCat 341

W/G COT. SHIRTS/BLOUSES,N-KNIT

Indonesia- Cat 342COTTON SKIRTS

Textile & Textile &

ApparelApparel

Industry in Industry in

AsiaAsia

Specialization in Asian countries (based on US Imports)

US Imports of 2010 / 2011 / 2012– Cat 342 COTTON SKIRTS (Quantity)

(Source: Office of Textiles and Apparel, US Department of Commerce)

in ‘000 Doz

Year

3,192

2,684

124 136

3,744

695692 713962

1,3141,244

971 1,0131,0361,015826

945

192

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2010 2011 2012

China

Bangladesh

India

Indonesia

Vietnam

Sri Lanka

Notes: Data is up to Aug 2012

56 60

56

39

6248 45

4471 52

55 4176

5446

Unit Price in US$/Doz

Surpassed

India

80 8692

2012 & After: Rebalancing in Asia

Bangladesh

- Cat 340 M/B COTTON SHIRTS, NOT KNIT

- Cat 347 M/B COT. TROUSERS/BREECHES/SHORTS

India-Cat 341W/G COT. SHIRTS/BLOUSES,N-KNIT

Indonesia- Cat 342COTTON SKIRTS

Textile & Textile &

ApparelApparel

Industry in Industry in

AsiaAsia

Specialization in Asian countries (based on US Imports)

India-Cat 341W/G COT. SHIRTS/BLOUSES,N-KNIT

Indonesia- Cat 342COTTON SKIRTS

Bangladesh

- Cat 340 M/B COTTON SHIRTS, NOT KNIT

- Cat 347 M/B COT. TROUSERS/BREECHES/SHORTS

India-Cat 341W/G COT. SHIRTS/BLOUSES,N-KNIT

Indonesia- Cat 342COTTON SKIRTS

Bangladesh

- Cat 340 M/B COTTON SHIRTS, NOT KNIT

- Cat 347 M/B COT. TROUSERS/BREECHES/SHORTS

India-Cat 341W/G COT. SHIRTS/BLOUSES,N-KNIT

Indonesia- Cat 342COTTON SKIRTS

17

US Imports of 2010 / 2011 / 2012– Cat 340 M/B COTTON SHIRTS, NOT KNIT (Quantity)

(Source: Office of Textiles and Apparel, US Department of Commerce)

in ‘000 Doz

Year

9,023

3,443 3,332

2,023

908 836531

5,488

10,902

5,837

8,627 8,705

1,468

2,5482,492 2,5702,890

1,491

0

4,000

8,000

12,000

2010 2011 2012

China

Bangladesh

India

Indonesia

Vietnam

Sri Lanka

Notes: Data of 2012 is for the previous 8 months

77

50

8666 63

94

95

6362

9892

81

877677

Unit Price in US$/Doz

88 110 118

Surpassed

India

(Source: Office of Textiles and Apparel, US Department of Commerce)

in ‘000 Doz

Year

9,477

14,106

17,061

12,525

19,04519,481

1,2131,5721,6912,690

1,8833,039

4,5173,974

3,451

8601,1771,435

0

5,000

10,000

15,000

20,000

2010 2011 2012

China

Bangladesh

India

Indonesia

Vietnam

Sri Lanka

Notes: Data is up to Aug 2012

US Imports of 2010 / 2011 / 2012– Cat 347 M/B COT. TROUSERS/BREECHES/SHORTS(Quantity)

6677

78

54 62

71

78 82 8654 61 72

61 75 70

92 112 114

Unit Price in US$/Doz

Leadership

2012 & After: Rebalancing in Asia

Vietnam

- Cat 338/339 COTTON KNIT SHIRTS

- Cat 638/639 MMF KNIT SHIRTS

- Cat 647/648 MMF TROUSERS

Textile & Textile &

ApparelApparel

Industry in Industry in

AsiaAsia

Specialization in Asian countries (based on US Imports)

Bangladesh

- Cat 340 M/B COTTON SHIRTS, NOT KNIT

- Cat 347 M/B COT. TROUSERS/BREECHES/SHORTS

India-Cat 341W/G COT. SHIRTS/BLOUSES,N-KNIT

Indonesia- Cat 342COTTON SKIRTS

US Imports of 2010 / 2011 / 2012– Cat 338/339 COTTON KNIT SHIRTS(Quantity)

(Source: Office of Textiles and Apparel, US Department of Commerce)

in ‘000 Doz

Year

74,991

66,310

41,745

33,15130,907

10,797

17,772

14,037 11,982

20,19622,334 21,635

25,296

36,747

42,354

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

55,000

60,000

65,000

70,000

75,000

2010 2011 2012

China

Bangladesh

India

Indonesia

Vietnam

Notes: Data is up to Aug 2012

4753

48

23

2724

37 43

42

35 40

37

36

42

38

Unit Price in US$/Doz

Confirmed

Leadership

Behind China

Confirmed

Leadership

Behind China

US Imports of 2010 / 2011 / 2012– Cat 638/639 MMF KNIT SHIRTS(Quantity)

(Source: Office of Textiles and Apparel, US Department of Commerce)

in ‘000 Doz

Year

28,774

24,520

6,036

7,989

5,909

9,812

13,04911,504

628 803

30,479

1,0011,496 1,780

708895794 1,097

0

4,000

8,000

12,000

16,000

20,000

24,000

28,000

32,000

2010 2011 2012

China

Bangladesh

India

Indonesia

Vietnam

Sri Lanka

Notes: Data is up to Aug 2012

44 46 42

32 33 3358

51 52 5850

51

51

58 56 766758

Unit Price in US$/Doz

Extended Lead

against othersExtended Lead

Against Others

US Imports of 2010 / 2011 / 2012– Cat 647/648 MMF TROUSERS(Quantity)

(Source: Office of Textiles and Apparel, US Department of Commerce)

in ‘000 Doz

Year

15,417

9,816

5,9586,323

2,768

7,076

8,376

5,714

406 502 332

15,758

2,911

4,5825,250

316514521

0

4,000

8,000

12,000

16,000

2010 2011 2012

China

Bangladesh

India

Indonesia

Vietnam

Sri Lanka

Notes: Data is up to Aug 2012

Unit Price in US$/Doz

5159

60

39 42

51

85 95 94

4950

65

61

6370

68 85 87

Extended Lead

Against Others

Vietnam

- Cat 338/339 COTTON KNIT SHIRTS

- Cat 638/639 MMF KNIT SHIRTS

- Cat 647/648 MMF TROUSERS

Bangladesh

- Cat 340 M/B COTTON SHIRTS, NOT KNIT

- Cat 347 M/B COT. TROUSERS/BREECHES/SHORTS

India-Cat 341W/G COT. SHIRTS/BLOUSES,N-KNIT

Indonesia- Cat 342COTTON SKIRTS

Textile & Textile &

ApparelApparel

Industry in Industry in

AsiaAsia

Specialization in Asian countries

Sri Lanka

- Cat 652 MMF UNDERWEAR

(based on US Imports)

2012 & After: Rebalancing in Asia

US Imports of 2010 / 2011 / 2012– Cat 652 MMF UNDERWEAR

(Quantity)

(Source: Office of Textiles and Apparel, US Department of Commerce)

in ‘000 Doz

Year

23,266

18,666

842 1,222 9551,426 1,5792,670

24,593

1,5211,917 1,684

1,7972,0402,822

0

4,000

8,000

12,000

16,000

20,000

24,000

2010 2011 2012

China

Bangladesh

Indonesia

Vietnam

Sri Lanka

Notes: Data is up to Aug 2012

1214 14

12 16 1320 13 13 1522 22 211920

Unit Price in US$/Doz

Highest in Value and Quantity

Except China

Textile & Apparel Industry in Sri Lanka

- accounts for around 40% of total export

earnings in 2011

Case Study: Ocean Lanka in Sri Lanka

• Weak raw material base

• High cost of energy source

(electricity, water, etc.)

• Higher labor cost

Weaknesses

• Strategic location

• Good infrastructure conditions

Strengths

Introduction of• Established in 1994

• The largest manufacturer of Weft Knitted Fabrics in the island

• Staff no: around 1,600

• JV subsidiary of

• Prestigious customer base comprising Victoria’s Secret,

Tommy Hilfiger, Marks & Spencer, Nike, Next, Gap & more…

Case Study: Ocean Lanka in Sri Lanka

Case Study: Ocean Lanka in Sri Lanka

ChallengeDuty reduction benefits from GSP+in 2005 after hit by Tsunami

GSP+ (Generalized Scheme of Preferences Plus)

• EU's special incentive arrangement for sustainable development and good governance

• Grants tariff concession (around 6-7%) for apparel exports to the EU

ChallengeAfter removal of GSP+ in 2010

Factories forced to add value to supply chain

by building design centers for customers

Taking cost out of UK

Improving flexibility and speed

Case Study: Ocean Lanka in Sri Lanka

OPP

(Opening

Price

Point)

Intimates Market

Case Study: Ocean Lanka in Sri Lanka

Strategy of Ocean Lanka & sewing factory partners

Being part of development of speed solutions

SPEEDSPEED & &

QUALITYQUALITY

LOW COSTLOW COST

Case Study: Ocean Lanka in Sri Lanka

Strategy of Ocean Lanka & sewing factory partners

Flash Programs

Less than 1 week for dyedprints garments

Industry lead time21 – 28 days

Industry lead timeIndustry lead time

21 21 –– 28 days28 days

Flash ProgramsLess than 1 week

for dyed printsgarments

Flash ProgramsFlash ProgramsLess than 1 weekLess than 1 week

forfor dyeddyed printsprints

garmentsgarments

Case Study: Ocean Lanka in Sri Lanka

• “Read and React”

• Allow partial buy

• Avoid buying based on gut instinct

Reduction in mark downs at store level

Increased business

Benefits for retailers

Beyond Price Competition

Some countries are improving their value

proposition beyond price

SpeedSpeed InnovationInnovation CSRCSR

(Source: Vietnam News)

Environmental Protection

(Source: The Times of India)

Environmental Protection

(Source: Lanka Business Online)

Environmental Protection

Thank you!