Denim Garments

China is the world's largest supplier of denim garments, accounting for 30% of global production. The country exported US$1.8 billion worth in 2004.

With quotas eliminated, demand is expected to increase by more than 20% in 2005. But a government-imposed export tax and looming US and EU safeguards threaten growth.

Learn how manufacturers plan to deal with these obstacles — and meet demand — with the deep profiles you'll find in this report of China's leading denim garment producers.

You'll also benefit from a complete industry overview, offering production forecasts, and information on design trends, QC developments and other vital sourcing issues.

What you'll get

In-depth profiles of 15 leading denim garment makers providing detailed information on manufacturing capabilities, product offerings and future plans. Based on factory tours and personal interviews with senior managers, these profiles are available nowhere else

Profiles of an additional 56 suppliers with key data such as machinery installed, exports by product type, main overseas markets and more

The results of Global Sources' supplier survey, forecasting price, product, production and R&D trends for the next 12 months

A Product Gallery highlighting 112 best-selling denim garments with product descriptions and color pictures

This report covers: jeans and shorts, jackets, skirts and dresses, and shirts

How you'll benefit

Learn how different garment manufacturing processes impact your sourcing decisions

Widen your competitive edge by being among the first to see what R&D teams are focusing on now

Understand the critical differences between China-made low-end, midrange and high-end denim garments

Get reliable Price Guides for the different types of denim clothing manufactured in China

Executive summary

China, the world's largest denim garment supplier, produced 30 percent of total global output in 2004.

That year, the country's 4,000 manufacturers shipped US$1.8 billion worth of denim garments, mainly to the United States and Europe. Exports were up 10 percent over the previous year. They are forecast to grow an additional 20 percent in 2005 as demand for China-made denim garments is expected to increase significantly in the months following quota elimination.

Exports in 2005 could even be higher than the 20 percent projected growth, but suppliers are wary of being overly optimistic given the threat of US safeguards and recently imposed export taxes.

The following are some of the key trends and issues we see in China's denim garment export manufacturing industry:

The future of some denim garment suppliers in China is uncertain. Increased competition and possible US safeguards may significantly impact companies that embarked on capacity expansions. These companies might not be able to recover their investments in additional machinery, which they purchased to boost capacity and become more competitive.

Small suppliers that focus on low-end production will be the most affected by the new government-imposed export tax. In the keenly competitive free-market environment, raising prices to compensate for lost profits could translate to lost orders.

Many low-end suppliers are moving up the value chain, focusing production on midrange and even high-end denim garments. These suppliers are investing more in R&D in order to develop more upscale products.

These factors have also led many midsize companies to vertically integrate production and improve manufacturing efficiency. Most large companies already conduct most, if not all, production processes in-house. Doing so has given these large companies a little more room to absorb unforeseen additional costs, such as export taxes.

Nearly all denim garment manufacturers in China produce jeans, and most of them also offer shorts, skirts, dresses and shirts. All of the companies featured in this report offer jeans as their main product line. At some companies, jeans account for about 90 percent of total production.

Jeans and shorts account for 64 percent of the denim garment exports by suppliers in this report. Jackets make up 16 percent, skirts and dresses 13 percent and shirts 7 percent.

The Products & Prices section explains the differences among low-end, midrange and high-end denim garments in each product category, including price ranges. The Manufacturing module discusses the different washing methods done at the factories and reviews quality standards followed by China suppliers. The Fabrics section details fabric weights and fiber blends used by suppliers and how the use of functional fibers affects product performance and price.

Industry overview

China's denim garment export industry is currently on unstable ground, facing the year ahead with cautious optimism. Among the major concerns for suppliers today are a government-imposed export tax, intense post-quota competition prohibiting makers from increasing export prices and potential US safeguards that threaten to stunt export growth.

In anticipation of the quota-free market, many small and midsize makers embarked on expansion projects and capability upgrades to boost capacity and improve efficiency.

However, in October 2004, various textile organizations in the US filed safeguard actions capping the 2005 import growth rate of China-made woven cotton shirts and trousers — which include denim garments — at 7.5 percent. While these petitions were not yet approved as of press time, there is a high possibility of them being implemented soon.

In addition, the China government imposed an export tariff beginning Jan. 1, in an attempt to prevent the US from implementing these safeguards. Exports in some apparel categories, including denim garments, are now being taxed by volume at US$0.02419 to US$0.06049 per item per kilogram.

The export tariff is also a means of encouraging suppliers to manufacture more upscale designs instead of flooding the market with cheap, low-end products.

The new levy is estimated to increase costs by up to 6 percent. Suppliers are mainly concerned about orders that were confirmed in 2004 and are scheduled for shipment this year. In most cases, the confirmed price is too low to compensate for the export tax and still yield sufficient profit. This problem is not an issue for most large companies, who are banking on increased orders as a result of quota removal to offset the profit loss. It is also not a concern for suppliers who were aware of the impending tax months before it was implemented and were able to renegotiate contracts with clients.

For new orders too, whether or not this additional expense will be passed on to buyers depends on the size of the company.

Large manufacturers that produce midrange and high-end designs have more room to absorb these additional costs and, with the stabilizing cost of cotton, can even drop denim garment prices a bit. Also, companies with vertically integrated facilities will be able to absorb the increased tax and keep prices stable.

However, small and midsize suppliers — especially those who purchased additional machinery to boost manufacturing capacity and become more competitive in the quota-free market — will be hit hard by the new tax. Many of them might not be able to recover investments made in new equipment, not only due to the additional export tax, but also because looming US import caps may curb export growth.

Most of these companies focus heavily on basic, low-value garments that yield wafer-thin margins. And with competition becoming more intense now, these small and midsize companies cannot afford to increase prices of their products, as doing so would essentially result in lost export orders and could subsequently risk their very survival.

All of these factors have placed these companies in a precarious situation. Many have already started looking at ways to cut production costs and some will undoubtedly even resort to cutting corners. Some suppliers will use 8oz denim, for example, to produce a garment that has to be made from 8.5oz denim.

Samples of supplier profile

A-Sky Clothing Co. Ltd
Guangdong-based A-Sky produces midrange denim jeans, jackets and skirts mainly for US fashion buyers such as Apollo. In-house production facilities involve sewing and finishing. Garment washing, fabric weaving and component manufacture are subcontracted to other factories.

This private, locally owned company employs 850 workers who produce an average 150,000 denim garments each month. 70 percent of this total is shipped to the United States and the rest to Eastern Europe, the Middle East and Asia.

Located in Xintang town in Guangzhou, Guangdong province, A-Sky benefits from convenient access to materials and components, as Xintang is one of the four key production hubs for denim garments.

Products
Denim jeans account for 80 percent of total output, and are priced between US$5 and US$6 FOB. Lower priced jeans are made of handbrushed pure cotton with enzyme or monkey wash. Higher priced jeans are made of linen and cotton blends with other washes and finishes such as whiskering, grinding, embroidery and beading.

Each pair of jeans comes with a belt, which is offered in retail shops as a free gift with the garment. However, since the factory's production net margin is as low as 10 to 20 cents, the belt adds US 50 cents to US$1 to the price of a pair of jeans. The belts are made of wood or silk fabrics and embellished with beads or rhinestones.

Denim jackets are priced between US$6 and US$7, and miniskirts at US$4.50. A-Sky has not raised product prices despite higher operating costs to remain competitive.

A-Sky's in-house R&D team includes two designers and 29 sample makers. The designers use CAD systems to create new product patterns based on buyers' specifications.

Women's denim garments are made of fabrics that contain 1 to 4 percent spandex fibers. To avoid quota restrictions, all skirts and some jeans are blended with 55 percent linen.

Most denim fabrics are sourced from local suppliers and only a small portion is imported. Components and parts such as zippers, tapes and buttons are sourced locally as well.

Manufacturing
A-Sky's sewing lines have four fabric-cutting beds and 480 sewing machines in various types and functions. The finishing lines have sandblasting machines and handbrushers.

In-house production procedures involve fabric preshrinking test and cutting, garment sewing, finishing and packaging. Embroidery and printing are subcontracted. Delivery is within 30 days, inclusive of fabric weaving.

Garment washing is subcontracted to local factories. The combination of in-house facilities and subcontracting allows the company to offer various washes and finishes including enzyme, whisker, monkey, dirty and chemical washes, as well as grinding and sandblasting.

The charge for enzyme washing starts at US 36 cents per piece. An additional US 24 cents is charged for both monkey wash and handbrushing.

Sample of product gallery

Jeans and shorts A-Sky Model: AS018 Minimum order: 3,000 pieces Packaging type: Polybag and export carton Delivery time: 30 days Indicated price: US$5.50 Description: Men's jeans; European size 32; cotton (100%); enzyme-, dirty- and monkeywashed; handscrubbed

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