Eclat Textile, the renowned Taiwan-based apparel and fabric supplier, has a vision for Vietnam in 2020. Not surprising, as very recently company’s Vice President Roger Lo had commented that Eclat is planning to ‘stop’ further expanding in Vietnam – maybe that’s what the global trade climate was indicating at that point of time.
Back in 2016, when the sportswear supplier to Adidas and Nike had decided to close their factories in China, it had instead planned to devote its resources and money to enhance its presence in Vietnam. However, just few months back, when the trade war between economic giants USA and China was at its peak, Eclat had found itself vulnerable again and thought of moving beyond Vietnam.
The approach still may not have changed much for Eclat Textile, but one cannot deny that the company still has Vietnam on top of its business plans. The company, it is believed, has found new outsourcing apparel units in southern Vietnam and that’s good enough to increase its capacity by as much as 14 to 15 per cent in 2020. Quite significant, as 2019 saw the company struggle to address the issues of workforce shortage – an issue that is becoming a growing concern in the country.
The new outsourcing factories in the country, the company says, would add 24 production lines. And if that happens, the monthly production capacity would enhance by roughly 4,50,000 pieces. While talking to media, the apparel and fabric supplier said that it will in all probability face a monthly capacity deficit of 1.8 million to 2.2 million pieces in 2020. And why so! Fast increasing orders from some of its major customers is making the company put on its thinking cap and act.
Consequently, it was evident from a conference held in November 2019 that Eclat Textile intends to increase its apparel output (per month) to over 10 million pieces in 2020 – a good jump from an approximate 8.7 or 8.8 million pieces in 2019. That’s where the finding of sourcing factories holds relevance. The rate of capacity utilisation may also see a rise.
Yes, Eclat does have plans to enhance the rate of capacity utilisation from 80 per cent to 95 per cent at the new sourcing factories in southern Vietnam, which should produce additional 8,00,000 pieces each month. However, Eclat is on the lookout for more outsourcing apparel units in the northern region of the country; the objective is to add more production lines per month, say 15 or 20.
The company is clear that there should no longer be any capacity issues in Vietnam. Explaining on these lines, Peggy Shih, who works as an analyst at Yuanta Securities Investment Consulting Company, maintained “The company has witnessed modest sales growth in 2019 owing to its lack of capacity and labour in Vietnam, but this is likely to be resolved in the year 2020.”
It is imperative to state here that Eclat Textile’s aggregate earnings during the January to October period of 2019 rose by 1.35 per cent. This was confirmed by the company in a statement recently. The company also saw a 0.8 per cent year-on-year increase in the aggregate income for the first 3 quarters so as to touch NT $ 3.16 billion or earnings per share of NT $ 11.54.
Eclat Textile, which specialises in circular knitting, has been committed to the development of ‘Green Textiles’, which has earned the apparel supplier many international certifications such as Oeko-Tex 100, ISO-14001, IMO and Control Union, indicating Eclat’s devotion to eco textiles. In fact, unfailed commitment to Green Textiles has been hugely instrumental in not only helping Eclat Textile win major brands, but also leave its mark in several apparel hubs like Vietnam over the years.
A lot of analysts believe that Eclat Textile will continue to gain from clients’ supply chain consolidations in 2020 as well – Its major clients being Adidas, Nike, Lululemon Athletica and Under Armour among some others. These renowned brands have a significant role to play in Eclat’s growth and progress. Underlining further, Channie Wang, Analyst, Jih Sun Securities Investment Consulting Company said, “The top 5 brand clients account for about 33 to 36 per cent of Eclat’s total revenue, and their contribution is expected to increase to 50 per cent in 2020. There is no risk of disconnection in supply.” Notably, Eclat shares too have seen a decent gain of more than 16 per cent in 2019.
Further on same lines, Long Vu, Material Sales Manager, Youngone Corporation, remarked, “Eclat Textile is a vertical garment factory, which will get more benefit when the free trade agreements between Vietnam and other countries come into effect. Also, Taiwanese companies want to become market leaders before the new investment trend of China entering the Vietnam market starts. And why not! Vietnam is still much ahead of many countries in Southeast Asia, especially with regard to infrastructure, worker skills, inflation rate and political stability.”
One needs to closely monitor the business strategies of Eclat Textile in Vietnam over the next 6 months as that would give a clear idea of company’s future in Vietnam in the next decade.