China exported US$1.8 billion worth of Christmas-related articles including trees, lights and ornaments in the 10 months to October 2005. This is an increase of about 12 percent from shipments in the corresponding period of the previous year.
Exports of Christmas lights accounted for US$823 million of total shipments in the period, registering year-on-year growth of 23 percent.
The US is the largest importer of Christmas-related products from China, absorbing US$821 million worth from January to October 2005. The EU follows closely with imports amounting to US$616 million in the same 10 month period.
The following are some of the trends we see in China's Christmas trees and lights export industry:
• Most suppliers will increase export prices by up to 10 percent in 2006 as raw material costs continue to escalate.
• Despite the rise in production costs, several suppliers will be expanding capacity, mainly by upgrading their facilities.
• Exports in the line are expected to increase moderately by about 10 percent in 2006. This growth will be driven primarily by Christmas lights.
• Competition in the industry, especially in the Christmas lights segment, will continue to intensify as more exporters are joining the line.
• Several manufacturers will increase output of LED-based Christmas lights due to the growing demand for energy-efficient lighting products.
• Christmas tree suppliers will release more unconventional models in colors other than green. Supply for inverted trees that can be suspended from the ceiling is also expected to increase.
China suppliers offer a range of Christmas trees and lights. For the purpose of this report, these have been divided into four categories: artificial Christmas trees, fiber optic Christmas trees, string lights and rope lights.
The Products & Prices section in this report details the features and price ranges of Christmas lights and trees from China. The latest trends in design and function are discussed in the R&D/design section.
The Manufacturing section explains the processes involved in the manufacture of trees and lights and how these differ in small and large companies.
The Industry Overview elaborates on the industry composition, highlighting key characteristics of the different types of suppliers.
Most makers are mainland China owned private companies. But there are also a number of foreign-invested suppliers in the country, most of which are invested or owned by Hong Kong or Taiwan companies. Almost all of the foreign companies are based in Guangdong province.
Reflecting the industry structure, 68 percent of suppliers profiled in this report are mainland China owned, while 16 percent are either Taiwan or Hong Kong invested.
Guangdong province is the main production hub for Christmas trees, while most suppliers in Zhejiang province focus on lights. But many manufacturers in Guangdong also produce lights and Christmas ornaments. Similarly, many makers in Zhejiang offer other types of decorative lighting and Christmas trees. Although trees are a secondary product for most Zhejiang companies, there are a few that specialize in the line.
To represent the industry accurately, the majority of suppliers interviewed for this report are from these two main production centers, with 44 percent of featured suppliers from Guangdong and 29 percent from Zhejiang.
To prepare this report, Global Sources research teams toured the factories of 15 makers and spoke with top-level executives, who discussed their 2005 performance and forecasts for 2006. The report has an in-depth profile of each of these makers, as well as detailed profile tables of an additional 47 suppliers.
Industry Overview
Exports of Christmas trees and lights from China have been rising steadily even as the industry struggles with sharp increases in material costs, intense competition and a labor shortage.
Prices of most China-made Christmas trees and lights are expected to increase in the next 6 to12 months due to a number of factors that have been increasing makers' operating expenses. The most critical of these is the rising cost of raw materials, particularly plastic, iron and steel.
Due to fluctuating crude oil prices, the cost of PVC in China has doubled over the past 12 months, reaching US$1,200 per ton at the end of 2005. The situation is aggravated further by a marginal short supply of plastic, despite most plastic processing companies running at full capacity.
Although domestic steel and iron prices have decreased because of reduced consumption, the materials are still 30 percent more expensive than they were in 2004.
Depending on their size and capability, Christmas tree and light makers are dealing with rising production costs in different ways. Large suppliers with sufficient capital and large capacity have been able to absorb increases in raw material costs to some extent. Some manufacturers have also expanded their overall capacity in an effort to achieve economies of scale.
On the other hand, small and midsize companies with limited financial resources can absorb only a portion of higher expenses. Since competition in the industry is stiff, these makers find it difficult to increase export prices. Most of them have had to cut profit margins to secure orders.
Some makers, both large and small, are also re-examining their manufacturing procedures to find new ways of enhancing efficiency and reducing expenditure. A number of suppliers interviewed for this report have automated production processes. Many are also upgrading their management systems to allocate resources effectively.
Aside from rising raw material costs, higher labor expenses have been posing a problem for Christmas trees and lights suppliers, particularly those located in the industrialized provinces of Guangdong and Zhejiang.
Since most of these makers hire temporary workers during peak season, they find it difficult to re-hire skilled workers and have had to raise salaries, and improve living and working conditions of employees. In fact, some manufacturers have increased the amount of work they subcontract to reduce overall labor costs, especially during peak season.
Competition is yet another concern in the industry. Since the production of most types of Christmas trees and lights does not require sophisticated equipment, a number of small and midsize companies have been attracted to join the business as international demand for these products rises.
In addition, an increasing number of suppliers from Taiwan, Hong Kong and South Korea have shifted their manufacturing facilities to the mainland to take advantage of lower production expenses. This has added to the already intense rivalry in the industry.
To deal with the competition, many midsize and large companies, particularly Taiwan and Hong Kong invested ones, are now moving up the value chain. Some of them are enhancing their R&D capability to position themselves as design-oriented makers, rather than concentrating on high-volume low-price products.
Off-season activities
Demand for Christmas trees and lights is seasonal and this determines the workflow of companies in China. During non peak periods, most suppliers manufacture decorative products for other festivities such as Halloween and Easter.
Some companies, on the other hand, have separate business units to produce entirely unrelated items. For example, Jiao Guang, a company specializing in Christmas lights, manufactures outdoor furniture during off-peak season.
In addition, most suppliers also develop new Christmas tree and light designs, explore new markets and negotiate orders with buyers during off-season.
Supplier profile
Act Star Trimming (Shenzhen) Ltd
Established in 2002, Act Star specializes in Christmas trees, with 70 percent of exports comprising fiber optic models and the rest, artificial trees. 80 percent of the supplier's overseas shipments go to the US and the remainder is exported to the EU.
In the coming 12 months, Act Star will start to produce other fiber optic products such as butterflies, rabbits and eggs for Easter.
In 2006, the supplier will buy two touch-screen automatic stretching machines and 10 branch-binding machines to improve efficiency and increase capacity.
Products
Low-end and midrange artificial trees from Act Star are priced from US$2 to US$6, while high-end models are double this price as they have more branches and are made of durable PVC.
Optical fibers, iron wires, bases and other accessories are sourced from suppliers in Shenzhen. Optical fibers used range from 0.3 to 1mm in diameter.
Act Star's five designers and engineers develop more than 100 new styles of trees every year. There are 30 workers for making samples. The R&D team conducts research on the shape of tips, wrapping and twisting method, colors and energy saving features of lights.
Manufacturing
Act Star's factory in Shenzhen has a three-storey workshop and warehouse. The factory employs about 300 workers during the peak season of March to September and 100 during the low season.
Molding and base manufacture are subcontracted locally. In-house production is done in two main workshops: the artificial trees production line on the second floor with 50 workers and the fiber optic trees workshop on the third floor with 250 workers.
Popular export models
The artificial tree workshop is equipped with six fully automatic and four semi-automatic stretching machines for making pine needles. The fully automatic machines have touch screen control panels and can twist four twigs at a time, while the semi-automatic models are manually fed with two strips a time.
For fiber optic trees, pine needles shaped like tassels are made using three ultrasonic stretching machines, each costing about US$5,000. The twigs are cut into standard lengths by machine or by hand and brushed to the desired shape. The workshop has more than 10 branch-twisting machines, 10 branch-binding machines and six trunk-binding machines.
Optical fibers are bound on the PVC twigs manually. During peak season, 30 workers are responsible for putting together the branches, trunk and base.
Art Star has a 10-member QC team. All cut twigs are sent to the dispatching room for counting and inspection. In addition, the company has a separate room for tests such as bulb aging tests and tree leaning tests. Adaptors are tested on a high precision automatic voltage regulator and a frequency converter. The company can also provide GS, CE, UL and BS certificates for the adaptors if required by buyers. After packaging, a random sample of 15 percent is checked.
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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