The garment industry is accelerating its transition away from dependence on China
Japanese general trading companies (trading companies) are competing to expand clothing production and procurement in Southeast Asia. Mitsui & Co. has finalized cooperative factories in Myanmar and other countries, and plans to increase the proportion of overseas production in Southeast Asia from 20% to 40%. Sumitomo Corporation plans to establish a garment manufacturing company in Vietnam this month. The Japanese clothing industry is worried about the deterioration of profits caused by rising labor costs in China, and is eager to expand purchases from emerging economies with lower labor costs. Japanese trading companies will open up new contractors, which will accelerate the pace of Japanese companies getting rid of dependence on China.
Most of Japan’s clothing industry and clothing stores do not have factories in Japan, but mainly produce overseas through trading companies. Because labor costs are low, these businesses are concentrating on China, and the import rate from China has reached as high as 80%. However, China’s labor costs have nearly doubled in the past five years. In order to meet Japan’s domestic demand for low-priced products, it has to find another production channel that can ensure profitability.
Mitsui & Co. signed agreements with factories in Vietnam and Myanmar to obtain exclusive garment production lines with a total annual production capacity of 1 million pieces. A factory in Cambodia with an annual output of 500,000 pieces will also start construction within the year. Sumitomo Corporation’s garment manufacturing subsidiary has approximately 50 technical instructors, including Japanese, at its local subsidiary in Vietnam. It hopes to expand production in Vietnam and improve the quality of products from cooperative factories in Cambodia and Laos.
Marubeni plans to increase its Southeast Asia production ratio, currently about 15%, to more than 30% by the end of March 2014. Itochu Corporation will send Japanese technicians to its Myanmar factory to expand shirt production. Mitsubishi Corporation is also preparing to set up bases in Indonesia and Cambodia to increase procurement channels.
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