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Business Trends

Uniqlo and Onward bolster Southeast Asian output

Japanese clothiers downsize Chinese production for cost savings

Many Japanese apparel companies move production from China to Southeast Asia. (Photo by Yumi Kotani)

TOKYO -- Uniqlo operator Fast Retailing is among the many Japanese apparel companies moving production from China to Southeast Asia in search of lower personnel expenses.

Fast Retailing plans to open an Indonesian plant as early as November in collaboration with such partners as Toray Industries. The site will use materials procured within Indonesia, departing from the usual practice of importing them from China, as the company works to establish start-to-finish production operations in the region.

China is home to around 60% of Uniqlo's key production sites. But factories in Vietnam and Indonesia are increasing. The prospect of low tariff barriers under the Trans-Pacific Partnership trade agreement has put a spotlight on Vietnam as a favorable production site.

Onward Holdings has set up an office in Cambodia to boost production there. About 60% of Onward's contract manufacturers are in China, while less than 10% are in the Southeast Asian nation.

"We will relocate production where Cambodia is more suitable than China" when considering logistics networks and labor costs, President Michinobu Yasumoto has said.

Casualwear company Adastria recently began making everything from thread to final products in Vietnam, Thailand and Indonesia. It manufactures roughly 80% of its products in China but aims to lift Southeast Asia's share to about 30% in two to three years.

Some companies are drawn to production in Africa, where low labor costs help it offer an advantage as a production hub to supply Europe and the U.S. Stripe International has production operations in Ethiopia. Fast Retailing is also considering African output.

China accounted for 34%, or $158.2 billion, of apparel exports by key economies around the world in 2016, according to the Japan Chemical Fibers Association. Asia's largest economy is still by far the biggest exporter in apparel, against second-ranked Bangladesh's 6% and Vietnam's 5%. But the Chinese share has dropped 5 percentage points from 2013. Southeast Asian exports have also picked up.

Companies often keep development and production of high-value-added items in China while moving simpler jobs like sewing to Southeast Asia and Africa. Onward plans to open a made-to-order suit-sewing facility next spring in Dalian, China.

Start Today, which operates the Zozotown shopping website, started making private-label made-to-order suits in China this July. The company has struggled to secure enough orders, significantly delaying deliveries.

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