San Fang Aims to Become Asia's No. 1 Synthetic Leather Maker

Taiwan's San Fang Industrial Co., a specialized manufacturer of polyurethane synthetic fiber and synthetic leather, is placing heavy emphasis on developing innovative products and boosting overseas production capacity in an attempt to capture the No. 1 spot among Asia-Pacific synthetic leather makers. That position is currently held by Nan Ya Plastics Corp., also of Taiwan, a member of the Formosa Plastics Group.

San Fang recently set aside more than NT$200 million (US$5.86 million at NT$34.1:US$1) for the development of innovative products which, it hopes, will attract orders from major international footwear manufacturers such as Nike, Adidas, and Reebok.

To expand overseas production, the company is planning to set up a new plant in Vietnam. The plant is to be build in three stages; after the first stage is completed in the first half of next year, it will have a monthly capacity of 300,000 yards of leather and position San Fang to replace Nan Ya as the top producer in the region--and to become Nike's largest supplier of synthetic leather worldwide.

San Fang is not alone among Taiwan's synthetic leather suppliers in its growth ambitions. Numerous companies in the line are confident that they will record substantial sales expansion this year.

"After forming a strategic partnership with shoemaker Pou Chen Corp. at the beginning of this year," reports Lin Meng-ching, San Fang's general manager and chairman of the Taiwan Regional Synthetic Leather Association, "we've resolved to boost our R&D efforts and expand production capacity. We've set aside 5% of our annual sales as a fund for the development of innovative products this year."

The development projects inaugurated this year will run through 2005 and are designed to overtake rivals in South Korea. In addition, says the general manager, "Our advanced R&D work will help downstream manufacturers, including Nike, Reebok, and Adidas, save R&D costs and focus on brand marketing. Our innovative products will help them develop new-style sport shoes, footballs, basketballs, and volleyballs."

San Fang claims that its synthetic leather has been used to make professional balls for NBA basketball games and World Cup football games in the United States.

Going Global

While San Fang concentrates on orders from shoemakers, another of Taiwan's synthetic leather makers, Union Leather & Printing Corp., wants to develop the global automobile synthetic leather market. The firm reports that it has begun shipping to American auto parts distributors and locking into the booming replacement market there. Union currently has a monthly capacity of 800,000 yards of synthetic leather in Taiwan, and will soon boost its paid-in capital by NT$400 million (US$17.3 million) to finance a further expansion of production.

Lin of San Fang says that Taiwan has a good chance of becoming a global R&D center for synthetic leather this year because, after years of upgrading, the island's synthetic leather industry has hugely enhanced its R&D capability and boosted its competitiveness.

The general manager says that the island's synthetic leather industry peaked out in 1994 with an annual output of 210 million years, equal to a full 50% of global output. Since that year, the industry has been in a steady decline in both production and export value. However, Lin comments, "I firmly believe that our domestic synthetic leather industry will see robust growth in both production quantity and value this year. Many manufacturers are switching their focus from growth of quantity to improvement of quality this year, and are concentrating on R&D in an effort to win orders from international-class firms for high-value-added and innovative products."

The switch to high-value-added products, the general manager goes on, has been prompted by price competition from rival manufacturers in mainland China. "To overcome this competition," he reports, "the manufacturers are using their specialized technology to develop niche products. For example, they have expanded their product lines to include high-end materials used in making golf gloves, furniture leather, apparel, and high-end auto seats in addition to the conventional shoes, handbags, sport shoes, and balls."

The manufacturers have developed a division of labor across the Taiwan Strait, moving the production of low-end items to mainland China while keeping the manufacture of high-end items in Taiwan.

Lin urges the island's manufacturers to be aggressive in developing large customers by working together with them in the development of new products. Also, he adds, "Domestic manufacturers should establish closer relations with customers by helping them develop environment-friendly products."