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PRC sewing sector performance in 2021 and its prospects in 2022

Time:2022-04-28 Browse Volume:311

In 2021, China's economy continue to bounce back, and global economic situations improve significantly, presenting a bright prospect of economic growth around the world. Sewing machinery enterprises in China have seized the opportunities as the situations improve, and withstood the difficulties posed by the pandemic and challenges like soaring prices of raw materials; they also made the most of the industrial chain advantages to expand their production capacities and interface with demands from domestic and foreign markets. As a result, the sector has delivered medium and even high-speed recovery growth with its efficiency continuously improved. On the whole, it maintained the positive momentum.

Economic performance of the sewing machinery sector in 2021

Boom index remains overheated, and the sector develops well after stabilized

According to data released by China Light Industry Information Center (graph 1), the overall boom index of the sewing machinery sector lingers at the overheating section, indicating that the sector rebounds robustly and consolidates its momentum.

Graph 1 Boom index of the sewing machinery sector from Nov 2020 to Dec 2021

 (Source: China Light Industry Information Center)

Strong production incentives and fast-tracked capacity recovery

As preliminarily estimated, the sector has in total yielded household and industrial sewing machineries of all types (excluding machineries used before and after the sewing process) of 15mn sets or so in 2021, growing 42.8% compared to the previous year. Statistics from a hundred sewing machine enterprises collected by CSMA show that a hundred of backbone sewing machine companies has accumulatively produced sewing machineries of 9.33mn pieces in 2021, increasing 59.61% on a year-on-year basis. By the end of last December, these companies have stocked approximately 1.68mn pieces of products, 82.96% higher than the same period a year earlier, reaching a record high in years.

1. industrial sewing machine:

As estimated, the whole sector has manufactured 10mn sets of industrial sewing machineries, increasing 61.29% compared with a year earlier, highest of all time (graph 2). By product categories, a hundred of backbone sewing machine enterprises' output of lockstitch, over-lockstitch and interlock sewing machines have all grown at least 70% in 2021, the output of special industrial sewing equipment increases 42.37% compared with a year earlier, automated sewing equipment grows 115.95% on a YoY basis, and computerized embroidery machine grows 81.18% compared with the previous year.

Graph 2 Annual output of industrial sewing machineries from 2011 to 2021 (estimated)

(Source: CSMA)

2. household sewing machine: 

Demands for household sewing machine slow down slightly in 2021. It's estimated that China has produced about 5mn sets of household sewing machines in 2021, increasing 16.27% on a YoY basis, but the growth rate is 27% lower than a year earlier.

3. sewing machineries used before and after the sewing process:

According to data collected by CSMA from 11 manufacturers of pre-sewing and post-sewing equipment, the sector has yielded 0.5mn sets of such equipment (including cutting bed, fabric spreader, finishing and ironing equipment), increasing 74.01% compared with a year earlier.

Domestic sales bounce back greatly but growth rate slows down over time

CSMA reckons that the sector has sold approximately 3.6mn sets of industrial sewing machines domestically in 2021, growing 57.2% compared with a year earlier (graph 3). Judging from the chart, its growth rate drops sharply since Q3, 30% lower than that of the first half of 2021.

Graph 3 Domestic sales and YoY growth rate of industrial sewing machine from 2011 to 2021

 (Source: CSMA)

Export reaches record high demonstrating huge potentials

According to data published by China Customs, the sewing sector has exported machineries worth of 4.1bn USD in total in 2021, increasing 23.16% compared with a year earlier, which creates a trading surplus of 2.18bn USD, 0.79bn more than the same period of the previous year. By categories, the industrial sewing machine realizes an export volume of 4.77mn sets worth of 1.54bn USD, increasing 22.1% and 48.07% respectively compared with a year earlier, and its average export price grows 21.27% on a YoY basis; spare parts worth of 0.47bn USD, 20.03% higher than a year earlier, which is also a record high. Of all the 196 export destinations, 144 witness positive growth, and all of the top 14 export destinations see positive YoY growth. 

Profitability improves noticeably but cost pressure piles up

According to National Bureau of Statistics (graph 4), 240 companies above designated scale in the sewing machinery sector have accumulatively made revenues of 37.2bn yuan, increasing 46.03% compared with a year earlier, and earned profits of 2.45bn yuan, growing 45.07% on a YoY basis; those companies' overall assets have grown 17.96% and their turnover rates have increased 23.79% compared with the previous year.

Graph 4 Monthly revenue growth rate of companies above the designated scale from 2020 to 2021

 (Source: National Bureau of Statistics)

However, challenged by rising raw material prices and exchange rates, the sector's profit rate dips slightly, and the manufacture cost grows higher and higher. National Bureau of Statistics observed that the 240 companies mentioned above achieved a gross profit rate of 17.97%, falling 12.29% on a YoY basis, and an operating margin of 6.58%, dipping 0.66%.

Characteristics of the sewing machinery sector in 2021

The sector delivers a medium and high-speed growth incentivized by global economic recovery

In 2021, facilitated by global economic recovery and string demand by downstream sectors at home and abroad, sewing machinery enterprises above designated scale in China have witnessed their revenue grow 46.03% compared with a year earlier and their production grow 42.85%. Meanwhile, the sector's export value is 33% higher than the previous year. All the indicators perform better that they did before the pandemic, setting new records.

Backbone enterprises carve out a new path creating a novel landscape

Against a new backdrop, backbone enterprises grasp more advantageous resources enabled by their manufacture powers, complete networks and channels, outstanding operation, and strong brand competitiveness, during which they have noticeably gained stronger growth momentum than SMEs, boosted the sustained transformation of industrial landscape, and played a grander pioneering role as evidenced by the following facts:

Production capacity keeps concentrating on backbone enterprises. Data collected by CSMA from 100 sewing enterprises show that the output of the top10 sewing machine manufacturers constitutes 77% of that of such 100 enterprises, and top10 manufacturers' production value makes up 61% of that of such 100 enterprises, indicating that the sector becomes more concentrated.

Backbone enterprises fare better than the average of the sector. CSMA's statistics of 100 enterprises imply that the sector's aggregate industrial output value grows at a rate of 57.26%, while 23 backbone enterprises including Jack, Zojie, Maqi, Supreme, Lejiang, Baoyu, Sinsim, Hikari and Juita grow more than 70%, far higher than the industrial average.

Backbone enterprises maintain a strong expansion momentum. Companies like Jack, Qixing, Shunfa, Maqi, Baoyu and Zojie have continued their expansions by means of merger and reorganization, building new factories, implementing programs on a targeted basis, and measures alike.

Backbone enterprises pursuing "dedicated, intricate, distinctive and innovative products". Sewing machinery companies speed up high-quality development in pursuit of transformation into manufacturing dedicated, intricate, distinctive and innovative products, setting a far-reaching example. Companies like Supreme, Sinsim, Maqi, Precious, Baoyu, Supreme, Doller, Ina, Kisae, TP, Ya'nuo have earned municipal, provincial or national prizes for such efforts.

Technological innovation performs a more strengthened role of support and guidance

With constant guidance of CSMA and concerted efforts of the sector, technological innovation has become a major driver for the sector's high-quality growth. As the innovation mechanism improves day by day and innovative achievements keep emerging, technological innovation performs a larger role in supporting and guiding the sector, which is corroborated by the following:

Backbone enterprises keep increasing investment in innovation. According to incomplete statistics, backbone enterprises' innovation input has grown 28.3% on a YoY basis; rising at a high rate, it has constituted 4.56% of the overall input.

New products and technologies keep emerging. In total, 76 categories of products have been selected by CISMA as model products. Generally, products have developed a tendency of being digital, intelligent, in units and in whole sets.

Elementary researches further deepened. Enterprises are determined to improve ingenuity and soft power of scientific research through strengthening basic researches. After selection, CSMA has included 24 tech subjects into "elementary sewing machinery theories and techs requiring improvement" program; by doing so, the mechanism and theory of tech research innovation will hopefully be reinforced.   

Innovation system becomes more and more complete. Supreme, Typical, Maqi and Han's have been recognized as the second batch of China light industry technological research centers, Qixing has set up provincial post-doctoral workshop, Ya'nuo has set up Guangdong intelligent sewing machinery tech center, and so on.

Digital and intelligent transformation propels industrial development

Digital and intelligent transformation has become a significant means to realize "overtaking on the corner", industrial upgrade and ascent to top powers, and become a development consensus, which is demonstrated by the following facts:

Construction of intelligent factories speed up. Companies like Jack, SGG and TP have already established Kanban system of automated, digital and info-based manufacturing; Zhejiang Dahao electrical knitting machinery digital workshop has been recognized as provincial intelligent factory (digital workshop) in Zhejiang in 2021; Deying has kept improving its intelligent factories through bringing in hundreds of five-axis manufacturing devices and mechanical polishing arms.

Broader application of sewing solutions in downstream sectors. For the purpose of empowering backbone downstream companies in apparel sector to realize intelligent and digital transition, sewing sector accelerates the R&D and application scenarios of intelligent IoT solutions, broadening the meaningfulness of sewing sector's services.

Product becomes more and more intelligent, services more and more virtualized. R&D and application of technologies like robotics, graphic visual, intelligent sewing, equipment IoT, data collection and cloud platform has become more and more integrated with the sector. On-line streaming, on the other hand, facilitates the interaction with and services for overseas customers.

Internal and external challenges pressure on business operation

In 2021, businesses have been faced with intense pressures in the context of a changing domestic and foreign atmosphere and volatile global situations. Firstly, the pandemic lingers on. Periodical outburst at home and re-occurrence at abroad have posed grave threat to recruitment, production, supply chain, and industrial chain. Secondly, raw material and fuel become more and more expensive. The price of bulk commodities relevant to the sector has soared, leading to a substantially higher manufacture cost. Thirdly, RMB exchange rate and freight rise. Throughout the year, RMB exchange rate has risen 7%, and freights increase many folds, resulting in clogged export and rising costs. Fourthly, saturated stockpiles forebode price war. As estimated, the whole sector stockpiles nearly 1.6mn sets of industrial sewing machines, a unprecedented level.

Predictions of sector development trend in 2022 and related suggestions

The year of 2022 is a key period for global economic recovery and the normalization of China's economic situations after the impact of Covid-19 thins out and scales down. It also influences the following development of the 14th five-year plan. Inspired by Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, the whole sector shall solidify its faith in growth, make progresses in a steady pace, develop risks awareness, encourage tech innovation, and burnish brand images, so as to tap inner growth potentials and promote high-quality development. 

Predictions of the year of 2022

In a new development landscape, backbone enterprises grasp more advantageous resources enabled by their manufacture powers, complete networks and channels, outstanding operation, and strong brand competitiveness, during which they have noticeably gained stronger growth momentum than SMEs, boosted the sustained transformation of industrial landscape, and played a grander pioneering role as evidenced by the following facts:

1. Global economic recovery may hopefully sustain

In 2022, global economy will hopefully continue its recovery; though compounded by a variety of factors, most of the countries can sustain the recovery momentum. And China's economy also show strong resilience.

2. Potential market demands to be tapped into

Bright prospects for export. As regional comprehensive economic partnership (RECP) comes into force, and Sino-America trade tensions ease, the high growth rate of export will not lose steam.

Demands in southeast Asia resume continuously. Vietnam and India have built up strong momentum towards economic recovery, and the manufacture sector in ASEAN countries has developed a expansion trend. Hence, order from downstream sectors will rise quickly, creating incentives for export.

Replenishment in and beyond the sector. On the one hand, huge consumption potentials of western countries will create orders for downstream sectors and raise demands. On the other hand, overseas sewing machineries distributors' stocks have yet to be replenished due to pandemic, maritime transport, and rising prices.

Sustained resumption of global fashion industry. As estimated by McKinsey, global fashion sales will scale up in 2022 along with the recovery of global economies. As the country increases its efforts in stimulating domestic market, investment in sectors like garment is likely to go up in 2022.

Stronger inner growth impetus. Tens of millions of sewing machineries are stocked around the world, and nearly 7mn sets will be needed for yearly upgrade in 2022. Moreover, the production transition of downstream sectors will hopefully create demands for automated sewing machineries and overall intelligent solutions.

3. Uncertainties of the pandemic trajectory

As pandemic cases keep resurging at abroad, and break out in many places domestically, the world is still faced with a grave pandemic control situation. The pandemic will probably not come to an end this year, which keeps jeopardizing the economy.

4. Complicated and changing external challenges

Russia-Ukraine conflicts inflict more plights. The conflicts further raise the price of fuel and food, and the inflation globally; the prices of bulk commodity and raw material will remain high.

Impacts of maritime transport and exchange rate linger on. The supply chain is clogged due to Russia-Ukraine conflicts, and the influences will be widely felt on export, costs, demands and others.

Policy tightening sends shockwave. At present, global inflation, soaring debts and currency devaluation escalate, and liquidity is hindered substantially, having a latent threat to consumption, investment and economic recovery.

Competition becomes more and more intensified. On the one hand, saturated stockpiles and stagnant domestic market will lead to intense competition; on the other hand, backbone companies take the initiative to compete with peers and bear in mind strong growth awareness, leading to fiercer contest.

Development predictions of the year of 2022

With all the above analyses in mind, it's expected that the global economic recovery in 2022 will be slower than a year earlier, demonstrated in the following aspects:

Economic shrinkage of the sector. Global economy will transition from strong rebound to normalized recovery. As estimated, revenues of the whole sector in 2022 will fall 15%-20% back to the level of 2018-2019.  

Significant decline of domestic demands. Considering the pandemic, market demands, industry and product cycles, domestic sales of industrial sewing machineries will decline 25%-30% approximately.

Overseas markets run steadily. Sewing machinery export in this year will probably return to normal gradually. In general, the export will slow down and dip 6%-9% compared with record highs reached last year.

Rising demands for medium and high-end machineries. Judging from downstream sector's responses, large manufactures in apparel and footwear sectors at home and abroad have received an avalanche of orders, which in turn will create demands for medium and high-end sewing machineries.

Suggestions about future development

First, adjust the production and sale planning, and boost high-quality development. To speed up structural adjustment; promote companies to shift their focus on quantity to quality and efficiency improvement; encourage them to concentrate on technological innovation, and improve product positioning and added values; inspire companies' sustainable growth with high-quality conviction.

Second, optimize market structure, and construct a new development landscape. Concentrate on the structural improvement induced by global economic growth and recovery, follow the new tendency of a burgeoning overseas market and sluggish domestic market, further exploit domestic market segments, take the initiative to explore emerging markets in southeast Asia, and promote internal and external circulations to complement each other. Meanwhile, build a comprehensive and sensible landscape, and penetrate the medium and high-end markets.

Third, boost technological innovation and match with medium and high-end demands. Medium-sized and large companies from downstream sectors have gradually recovered, and will serve as the pillar of economic growth. It's advisable to put more into technological innovation, locate medium and high-end demands, reinforce innovation application and integration and original innovation by means of inherent strengths, propel the transformation of product structure and tech advance, and tap into market demands with new products and technologies.

Lastly, focus on quality improvement and activate inner growth sources. Seek to produce refined and competitive industrial sewing units, consolidate the first growth curve that companies' survival and development heavily rely on in a long term, ignite the inner growth impetus and competitiveness. While pursuing being intelligent and digital, companies shall put more resources into improving the quality of fundamental products, and keep refining product quality and reliability, so as to yield industry models and globally renowned brands as soon as possible.

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