Eyewear exports from China are increasing at a steady pace, even though the industry is consolidating, and suppliers are dealing with numerous challenges including rising raw material costs and intense competition.
In the first six months of 2006, eyewear exports from the country grew 15 percent to 827 million pairs and 35 percent to US$612 million, compared with shipments made in the previous corresponding period.
If current growth rates are sustained, export sales could exceed US$1.2 billion by the end of 2006.
The US is the largest importer of China-made eyewear, purchasing 458 million pairs worth almost US$317 million in 2005. This constitutes about one-third of China's total exports in the line.
The EU, led by Italy, is the second largest importer with shipments totaling 267 million pairs at a value of US$259 million. More than one-third of these went to Italy.
The following are some of the key trends we see in China's eyewear industry:
• Many suppliers will raise prices due mainly to escalating raw material and labor costs. But intense competition is keeping price increases to a minimum, with most makers planning to raise quotes by 5 percent or less.
• The industry is expected to consolidate within the next three years. A number of companies have already closed their factories in the past 12 months because they could no longer keep prices low and sustain operations. More suppliers are forecast to fold in the next few years as a result of keen price competition.
• Competition is pushing companies to produce more upscale eyewear models as well. The market is already saturated with low-end designs, making it difficult for many suppliers to compete. More companies are thus offering midrange and even high-end designs to set their products apart from competitors.
• Companies are also eyeing increased exports to the EU. Buyers from the region generally are willing to spend more on higher-value eyewear.
This report covers sports and fashion sunglasses, optical frames and reading glasses, the three main eyewear categories made in China. While there are some companies with the capability to manufacture lenses, the product is still not widely exported from the country. For this reason, lens suppliers are not covered in this report.
The Products & Prices section in this report details the features and price ranges of eyewear made in China.
The latest trends in frames and lenses are discussed in the R&D/Design section. The Manufacturing section explains the processes involved in the production of eyewear and how these differ in small and large companies.
Industry Overview
China's eyewear industry is expected to consolidate in the next three years, even as exports continue to grow steadily. In addition, the industry is foreseen to continue its steady shift to upmarket manufacture.
The country's overseas sales of eyewear have been increasing over the past three years. At US$960 million, exports in 2005 were 25 percent higher than in 2004. Shipments made in the first six months of 2006 increased by almost 35 percent to US$612 million compared with the US$454 million worth of eyewear exported in the previous corresponding period.
In terms of volume, however, exports are not growing as fast. Outbound shipments in 2005 totaled 1.4 billion pairs, up by only 8 percent. The higher growth in export sales value can be attributed to increasing average unit export prices, which went up 17 percent that year.
In fact, while export volume in the first six months of 2006 had grown 15 percent, average unit export prices increased 18 percent.
Higher raw material and labor costs are the main reasons behind escalating average unit export prices. In 2005, the cost of metal and plastic increased by about 60 percent. Labor costs, meanwhile, went up an average 20 percent as companies increased spending on compensation and benefits to retain workers amid the ongoing shortage in manpower. Labor costs are expected to go up an additional 15 percent in 2007.
The majority of eyewear companies in China, however, offer basic, low-value products and operate on razor-thin profit margins. Many of these companies cannot absorb increases in material and labor costs and thus have had to raise prices.
But with thousands of suppliers offering similar, mainly low-end eyewear, companies cannot raise prices commensurately and still have to suffer some losses.
Price competition among these suppliers has become so severe that a number of companies are being forced to close their factories. These makers can no longer afford to keep prices low, absorb losses and still be able to sustain operations.
In Wenzhou alone, about 100 suppliers have already stopped operations in 2005. More than 300 companies across China are expected to close their factories in the next 12 months.
In general, China's eyewear makers are not strong in terms of R&D capability. With the focus on low-end models, this has resulted in rampant design copying, further intensifying competition.
Industry consolidation has made it more vital for makers to move out of low-end production. In fact, the slow but steady shift to producing midrange and high-end eyewear that began about three years ago is also a reason average export unit values have been increasing.
Supplier Profile
B&C Optical Industrial Co. Ltd
Established in 1996, B&C is an ISO-certified manufacturer of eyewear products, components and accessories.
Aside from its headquarters, the company maintains a special ODM processing center, plus separate marketing offices for domestic and international trade.
B&C exports 50 percent of its output to Europe, Japan, South Korea, Taiwan, Singapore and Malaysia.
The company also produces eyewear for the domestic market under the B&C, Homme, Biao Zhi and Moto brands.
It holds patents for different types of technology such as soft optical frames and flash-drive sunglasses, which are being sold locally.
Products
Excluding components and parts, sunglasses account for 35 percent of B&C's output while 65 percent is allotted to optical frames.
The company concentrates on midrange eyewear, taking up 65 percent of production. One-fourth involves high-end models while the remainder is for low-end designs.
Low-end models have frames in brass, nickel silver and Monel, and are usually priced from US$3.50 to US$5 per pair. The frames are fitted with PC or CR-39 lenses.
Products in the midrange have stainless steel or memory metal frames and are US$5 to US$8 per pair. CR-39 or polarized lenses are used.
Versions with pure, beta or memory titanium frames are considered upscale and are priced from US$10 and above. These have mainly polarized lenses.
The company plans to increase prices by 5 to 10 percent in the next 12 months due to rising material costs.
Most metal alloys for frames and nose taps, tips, hinges and lenses are sourced locally while stainless steel and titanium are imported from Japan. Springs are purchased from Germany.
All this column of information contained in China Sourcing Reports is the result of original, independent and impartial research conducted by Global Sources analysts.
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