Accompanied by the warming up orientation of domestic textile industry, textile machinery sector also showed signs of upturn, although the overall profit and revenue remained pathetically poor and kept plunging. Statistics indicated that total profit of the whole sector has descended 48.24% during the first five months of 2009 which is overwhelmingly faster descending rate than the overall industry output value and sale income descending.

There are several reasons accounting for this phenomenon. On the one hand, product price must have to be lowered down to gain orders under the recessed and shrinking up market demand. Second, outstanding payment from customers is aggregating due to the economy crisis. Sometimes these outstanding payments would turn out to be bad debt. On the other hand, raw material prices kept going upward which certainly increased the manufacturing cost. It is a unavoidable tendency for the raw material and energy prices to soar up, textile machinery sector is facing severe manufacturing cost increase. Both reasons explain why the profit margin of this sector keeps descending. How to make a profit out this adversity becomes the major theme from now on.

Brutal price competition and increasing manufacturing cost pose huge threat to company survival
Price competition has long been an old topic in this sector. It seems that textile machinery manufacturers have no alternative but to foredown the price in order to get orders trying to avoid bankruptcy. More brutal price competition, more limited profit margin. Textile machinery is entangled in a vicious circle. Take automatic flat knitting machines for example, a domestic flat knitting machines would sell 170 thousand RMB in 2005, in 2009 the price is close to 140 thousand, some even sell for eighty or ninety thousand RMB. This kind of situation is not unique, international market has met up with similar situation. International textile machinery price is universally plunging due to the financial crisis. Profit margin in the first months is merely 2.45%.

Price competition has severely affected the profit margin of textile machinery manufacturers while in another part it is detrimental to a healthy and in-order industry development. Some enterprises use inferior spare parts to cater to the low price demand from certain customers. This is more like a suicidal way to improve the situation. Not just this is bad for company itself, but also jeopardizes the international product image of China textile machinery. Many entrepreneurs call for red light for this sector disorder and standardize industry competition for the long run´s sake.

Avoid consubstantial competition; Lower cost throughout management ; Innovation is the source of benefit
In the long run, raw material and energy price increase is the logic trend. It is barely adequate for the market alone to absorb all the enormous manufacturing costs. Companies must have to take measures exploring deeper internally to relieve this pain. It is a much sensible and acceptable way to broaden profit margin by enhancing the machinery performance and product added-value.

Many companies are taking ways of adjustment and product innovation to broaden profit margin. Enterprise existence cannot survive without marketable products. Some products must have to be abandoned as long as they cannot generate revenue although or however we have been proficient of in the long run, said Mr. PanWeiguo, president of Youying textile machinery Co., Ltd. Many companies never ceased their way of R&D investment no matter how severe and brutal the circumstances are. Rieter, for example, has successfully developed D221 high-speed drawing frame and E611 Combing machine.

Economic crisis has taught everybody a lesson in a hard and brutal way. It is long gone for the days that "you sell, you gain". Textile machinery is transforming from the conventional large quantity period to the instinct small quantity, multiple variety period. Structure transforming and upgrade is the inevitable way that every company must take to realize a sustainable development, said Mr. Zhu Peng, president of Dongfei Marzoli textile machinery. The development of economy has proved that economy crisis can also be used as good opportunity to adjust and upgrade structure, as well as a turning point to enlarge self-brand influence. Only excellent companies can prove themselves and win the market out of this industry reshuffle.

Source: China Textile Leader