Mon, Mar 30, 2009 - Page 12 News List

Yunlin towel maker has its cake and eats it too

WIPING AWAY THE COMPETITION: A local towel manufacturer has found a novel way to compete with cheap Chinese imports, but fears an ECFA could kill its edge

By Joyce Huang  /  STAFF REPORTER

Shing-Long Towel Industrial Co vice president Michael Lin stands next to a “towel cake” he designed at the company’s headquarters in Huwei, Yunlin County, on March 22.


Amid the protracted economic slowdown, many pundits have touted cost cutting, but 40-year-old Michael Lin (林潁穗), vice president of Huwei, Yunlin County-based Shing-Long Towel Industrial Co (興隆毛巾), said that innovation was the key to survival for the nation’s towel industry.

Lin is the brainchild behind the hot-selling Shing-Long “cake towel” — a repackaging and design idea to add value to traditional towels, which has reversed the fate of the once debt-ridden towel company that his parents founded in 1979.

The company’s newly developed “cake towel” business, launched in 2005, has helped quadruple revenues to NT$42 million (US$1.24 million) last year since 2004, when the company incurred a debt of NT$30 million.

After repaying a NT$20 million debt, Lin said he believed the value-added towel business would now be the way forward for the company, although he said his old-fashioned parents still found the cake idea too fancy to sustain.

“I am sure we’re on the right track and if we miss out this time, we won’t have another opportunity,” he said.

Shing-Long is one of the remaining 50 towel companies in Huwei, down from a cluster of more than 200 before 2002, when the government opened the domestic market to low-priced China-made towels, which hurt the nation’s towel manufacturers.

“During that downturn, we managed to see a smaller-than-expected drop in sales of 10 [percent] to 20 percent, while the sales of most of our peers dropped by up to 80 percent,” Lin said.

Only when the government imposed a 204 percent anti-dumping tax on China-made towels in 2006 did domestic towel manufacturers begin to regain market share.

Today, there are about 100 towel manufacturers nationwide with an annual value of NT$5 billion, making up an 80 percent market share in Taiwan, Yunlin Towel Industrial Technology Development Association chairman Chou Ching-yuan (周清源) said.

But because of pricing, the industry has completely lost its export competitiveness, although the quality of towels made in Taiwan are much better than Chinese towels, some of which use the recycled byproducts of polluted medical waste in their cotton, Chou said, adding that his industry used to have a combined export and import value of NT$15 billion before the 1990s.

Despite the high quality of Taiwanese towels, the retail prices of Taiwan-made and China-made towels are about the same, whereas wholesale prices for Chinese towels are almost half those of Taiwanese towels because of the huge discrepancy in cost structures across the Strait.

For example, Lin said that plain-colored China-made towels cost around NT$100 per kilo, half the cost of Taiwan-made towels, which cuts into wholesalers’ profits when both are retailed at around NT$250 per kilogram.

“That is why many sales channels [once] shut Taiwan-made towels out of the market [a few years ago],” Lin said.

Chou said that the entire industry was worried about President Ma Ying-jeou’s (馬英九) plan to sign an economic cooperation framework agreement (ECFA) with China, which would allow the immediate re-entry of China-made towels. However, the industry will still have to face the threat of the re-entry China-made towels in one-and-half years time when the nation’s anti-dumping ban on the industry expires.

“We’re not afraid of competition. It’s the unfair competition that we’re concerned with,” Chou said, urging the government to clarify the trade pact’s contents.

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