China solidifies dominance in furniture
BY EVELYN IRITANI
Seattle Times Dec. 1,
DONGGUAN, China - In a vast climate-controlled room
far from the dust and din of the woodcutting ma-chines, rows of young Chinese
women create elabo-rate patterns from thin strips of wood. Fingers flying, they
shape veneer into complex patterns of contrasting grains and colors, wooden
tapestries meant to trans-form mere cabinets into objets d'art.
who craft these designs are paid 40 cents an hour, which allows factory owner
Samuel Kuo to make high-end furniture for American consumers for 30 percent less
than his U.S. competitors can.
By tapping into the aspirations of China's
poor, Kuo has helped turn a remote stretch of rice paddies in the Pearl River
Delta into a furniture-making powerhouse. His factory is one of thousands
churning out dining room sets, sofas, china cabinets and coffee tables. In less
than a decade, China has become one of the world's leading furniture producers
and the top exporter to the United States.
“For the next 10 or 15 years,
China will be the manufacturing base for all of the world,” said Kuo, 47, whose
Lacquer Craft Manufacturing ships 1,400 containers of furniture - the equivalent
of 18,200 bedroom sets - to the United States each month. “For anything that
involves people, China is the place.”
An outpouring of Chinese products is
reshaping the global economy. Around the world, makers of everything from
bicycles to bath towels are struggling to survive intense competition from
inexpensive, high-quality Chinese goods. Thousands of factories have closed as
production jobs have moved to China.
That migration has been driven, above
all, by low wages. In furniture, for instance, labor represents 30 percent of
the cost of production in the United States. In China, it is less than 7
As furniture factories have moved to China, their suppliers and
related businesses have followed, making the country an exceptionally efficient
place to operate. Akzo Nobel, a Dutch-Swedish conglomerate that is one of the
largest suppliers of furniture finishes, has closed plants in the United States
and Europe and is opening three factories in China.
“We can't expand fast
enough,” said Michael Keith Estes, a managing director at Akzo Nobel. He
predicted that 90 percent of U.S. furniture production would move to China
within five years. “It's a sleeping dragon, and it woke up.”
led the way
Among the first to move to China were furniture producers
from Taiwan, which were being squeezed by rising wages and land costs at
Kuo, whose family manufactured wooden pool cues in Taichung, a city
in central Taiwan, was among the pioneers. After completing his military
service, Kuo took over the family business, expanded into furniture and began
looking across the Taiwan Strait for a cheaper place to operate.
comparison of production costs: In Marion, N.C., a center of the U.S. industry,
and Dongguan, China’s main-furniture manufacturing area
Factory worker, annual
line supervisor annual
Plant manager, annual
square foot. Cost to
$7 per square foot
That was in the early 1990s, and China was eager to attract foreign investors.
The government wanted to convert the southern city of Dongguan, 50 miles north
of Hong Kong, to an industrial zone specializing in exports. Officials there
offered Kuo tax breaks, inexpensive land and light regulation.
Long-standing animosity between Taiwan and Beijing complicated such a move. At
the time, Taiwan prohibited direct investments in the mainland. But
entrepreneurs devised ways around the rules, and the government generally looked
the other way.
Kuo set up a factory in Dongguan and started making simple
wooden tables, which he shipped to the United States at bargain prices. Quality
was unpredictable. Shoddy packaging fell apart in transit and the furniture
arrived with nicks and dents. It was hard to find a steady supply of top--grade
wood, because China's forests had been depleted by years of unrestrained
Gradually, Kuo turned things around. He imported high-quality
wood, upgraded his machinery and brought in experienced managers from Taiwan and
the United States. Soon, his Dongguan factory was able to meet the standards of
a growing list of U.S. customers, including prominent brands such as Ashley,
Standard and Progressive. In 1994 he closed his factory in Taiwan.
Competitors took note of Kuo's success and followed him across the strait.
Today, 2,000 foreign furniture companies operate in southern China, 350 of them
owned by investors from Taiwan.
Those Taiwanese-owned factories produce
nearly three--quarters of China's wooden furniture exports. Kuo hopes this
mutual dependence will reduce the likelihood of military conflict between the
island and the mainland. "We speak the same language," said Kuo, whose wife,
Grace, handles the company's finances. "We're all Chinese."
The road to Kuo's factory in Dalingshan, a township within
Dongguan, is lined with small shops selling wood, paints and furniture making
supplies. Lacquer Craft is a sprawling complex of blue--and-white buildings with
several huge manufacturing, assembly and warehouse facilities and four
dormitories for Kuo's 5,000 employees.
By midmorning, the factory is
bustling. Young men wearing goggles feed wood into precision cutting machines
that fill the room with a constant screech. Workers drive motorized carts
between buildings, unloading supplies and moving furniture pieces to the next
step in the production process. At the end of the assembly line, workers wrap
dining room chairs and dressers with padding and plastic for the long sea
By the time it reaches the showroom of a Macy's or a Levitz, the
furniture commands prices ranging from $300 for an end table to as much as
$4,000 for a dining room set.
At each step of the manufacturing process,
Kuo tries to shave costs without compromising quality. He does this by combining
modem technology with manual labor.
He has purchased some of the world's
most expensive wood-measuring and cutting machines, so waste is minimized and
furniture parts will fit together seamlessly. But he relies on human hands for
fine decorative touches or for rote labor that in China can be done at low cost.
For instance, Kuo economizes on raw materials by purchasing cheap wood for
certain uses and paying workers to cut out the knotholes.
In the "veneer
room," hundreds of women piece together intricate designs. The ornamentation
enhances the appearance of a cabinet or a bureau and thus its market value. That
is not the only reason Kuo is fond of veneer. Every last piece of wood is used,
so there is far less waste and more furniture can be made from the same quantity
“He has the best veneer room in the world,” said Winsor White,
an American furniture designer living in the Philippines who came out of
semi-retirement to work for Kuo. “No one in the U.S. can afford to do that
Once a piece is completed, it heads down a mile-long, serpentine
finishing line with 19 spraying stations and 300 workers, more than twice as
many as would be found in a U.S. factory. Each item gets extra sanding, buffing
and finishing, attention reserved for only the most expensive furniture in the
A magnet for workers
Kuo has no trouble
filling jobs. An estimated 10 million laborers from across China, more than 60
percent of them women, are looking for work in Guangdong province. Their hours
are long and the labor grueling, sometimes dangerous. They keep at it because
their paychecks help feed the families they left behind.
Kuo said it's in
his interest to offer his workers progress toward a better life, however
gradual. Employees who are treated well are less likely to defect to one of his
competitors. Lower turnover reduces training costs.
people all got the same pay,” he said. “Now, people will jump to another job for
a penny an hour more.”
As competitors flooded into China, Kuo realized that
he couldn't compete on low prices alone. After studying the U.S. market, he
became convinced that having a brand of his own was the best way to increase
sales and profit.
As a supplier, Kuo was not in control of his production.
The large American furniture brands that were his major customers told him what
to make and how much. Kuo wanted to sell directly to retailers. But he knew that
an unknown Chinese brand stood little chance of success.
Then Kuo heard
that one of his biggest clients, Universal Furniture, based in High Point, N.C.,
was up for sale. Last year Kuo paid an undisclosed sum, believed by industry
analysts to be at least $25 million, to acquire Universal's brand name and its
sales and marketing network. He did not want its factories in the United States
and Asia, which were sold or closed.
The marriage of Universal Furniture's
name with Kuo's low-cost production base has been lucrative, he reports. Though
overall U.S. furniture sales have been slumping, Kuo said the demand for his
ornately carved dining room sets and veneered cabinets has been so strong that
he plans to spend $20million building new production capacity in China.
said furniture manufacturing is in China to stay. One reason is that the
country's population at 1.3 billion the world's largest ensures an almost
endless supply of cheap labor. Millions of peasants will travel across the
country for even a meager paycheck. As wages rise in industrial areas such as
Dongguan, manufacturers can open factories elsewhere.
Kuo has started
building a second factory near Shanghai, where wages are lower than in southern
China and government incentives even more appealing.
“China is getting
stronger and stronger," Kuo said. "It still has 10 to 15 years to go before it
reaches the next level. But compared to 10 years ago, it has come a long, long