Analysis of the Current Status and Future Development of Synthetic Leather Industry

1、 History of Synthetic Leather Industry

   The embryonic form of synthetic leather production technology originated in Italy in the early 1920s. In the 1960s, DuPont in the United States first introduced polyurethane synthetic leather with natural leather characteristics. The global synthetic leather industry began a continuous process of simulation and made breakthrough progress in the mid-1970s. DuPont was the first to introduce wet process PU synthetic leather production technology. This product has good simulation performance, with a soft and smooth surface, bright colors, comfortable hand feel, and obvious advantages in terms of breathability, elasticity, moisture permeability, and cold resistance compared to traditional synthetic leather. As a substitute for natural leather, PU synthetic leather can be widely used in various fields, such as shoes, bags, clothing, decoration, sports equipment, and automobiles.

In the early 1980s, wet synthetic leather rapidly expanded worldwide, with the emergence of synthetic leather production centers represented by Italy in Europe and Japan, South Korea, and Taiwan in Asia. The synthetic leather technology of Japan and Italy represented the cutting-edge level at that time. Japanese products are the darlings of the clothing industry. Japan has a high level of chemical, synthetic, and textile technology, and has conducted in-depth research and development on PU resins, fabrics, and fibers. It places great emphasis on the intrinsic properties of products such as strength, moisture permeability, and PU film-forming structure, and has a high level of technological content. Japan is leading the world in technological progress in non-woven fabric substrates (including ultrafine fibers) and environmental protection of PU resin. Mitsubishi Adhesive's Grore is a suede type product mainly made of acrylonitrile fiber. It was originally created in 1980 and is mainly used for clothing fabrics. Asahi Kasei launched Lamous suede like products in 1980 to meet the demand for clothing fabrics at home and abroad. Coca Cola and Dongli are the world's two giants in high fidelity leather production.

   Italian synthetic leather products are more influenced by genuine leather processing technology, with many changes in appearance and high artistic taste. They pay more attention to product design and fashion. The products mainly include downstream products such as leather shoes and luggage accessories. The development of synthetic leather in Japan and Italy was technologically advanced in the 1980s, while the development of synthetic leather in Taiwan and South Korea ranked first in production, with Taiwan's synthetic leather industry developing particularly rapidly. In the mid-1980s, the prosperous development of Taiwan's footwear industry directly drove the development of the synthetic leather industry in the region. By the early 1990s, Taiwan's synthetic leather production technology had gradually improved, with increasingly diverse varieties and superior performance. Its export volume accounted for more than 50% of the world's synthetic leather exports, leading the trend of global synthetic leather product production and operation, product development, and market expansion.

Since the early 1990s, due to labor shortages, rising wage costs, and strengthened environmental protection requirements in Taiwan, the competitiveness of Taiwan's footwear industry has gradually decreased, and a large number of overseas orders have been lost. As a result, many shoe manufacturers have shifted to mainland coastal areas such as Fujian, Zhejiang, and Guangdong, which have abundant human resources and low wage costs, directly promoting the rapid development of mainland footwear industry. In fact, not only Taiwan, but also South Korea and Italy began to shrink their synthetic leather industry, while Japan only had a slight advantage in microfiber leather, and the entire synthetic leather industry began to gradually shift to the Chinese Mainland.

   There are four main reasons for this. The first is the transfer of downstream products. After China entered the reform and opening up era, the country strongly supported economic development. Due to various policy incentives and abundant human resources, China became the world's factory in the 1990s. Manufacturers of downstream synthetic leather products such as shoes, bags, and clothing invested and established factories here. Secondly, the integrity of upstream industries enables them to have the conditions to transfer to China. The country encourages the development of the synthetic leather industry, which has led to extremely rapid growth in China. Many enterprises have also sensed business opportunities and have introduced advanced production equipment and technology from abroad. By the 1990s, a complete industrial system had been initially formed, with hundreds of dry and wet production lines. There are hundreds of synthetic leather factories in the Wenzhou area. Thirdly, governments at all levels attach great importance to the development of China's own synthetic leather industry, and China has abundant human resources, which provides a favorable policy environment and human resources for the transfer of the synthetic leather industry to the mainland. Fourthly, other countries and regions do not yet have the conditions or advantages to vigorously develop the synthetic leather industry.

2、 Current situation of synthetic leather industry

1. Global distribution

1. China is entering the ranks of advanced synthetic leather countries in the world as a major producer, consumer, and importer/exporter of synthetic leather. At present, there are over 2000 synthetic leather enterprises with thousands of production lines nationwide, accounting for two-thirds of the world's total production in terms of production lines and output. 20% of synthetic leather products are exported to countries around the world, with 300000 tons exported last year and an export value of 1 billion US dollars, maintaining a continuous growth trend for many years. The geographical distribution of synthetic leather in China is mainly concentrated in the Yangtze River Delta, the Pearl River Delta and coastal large and medium-sized cities. Artificial leather enterprises in Zhejiang, Jiangsu, and Guangdong regions account for 80% of the country's total. From the perspective of professional markets, there are over 30 large-scale synthetic leather markets in China, such as Wenzhou, Lishui, Taizhou, Jiaxing, Guangzhou, Dongguan, Huizhou, Gaoming, Jilong, Fuding, Quanzhou, etc. It has a great influence all over the world, especially in the Wenzhou area of Zhejiang, which has been named the "synthetic leather capital" of China. The scale of synthetic leather production in Shandong Province is relatively small, but the quality and variety of synthetic leather are far ahead in the country. Yantai Wanhua Synthetic Leather Company purchased a complete set of equipment and manufacturing technology for "synthetic leather for shoemaking" from Japan's Keleli Company as early as 1978. In 1997, it developed nylon ultrafine fiber synthetic leather using its own technology, and its products are popular both domestically and internationally. In 2001, Wanhua cooperated with Taiwan Sanfang Chemical Industry Company and injected private capital to establish Yantai Wanhua Ultra fine Fiber Co., Ltd. Currently, it has produced ultrafine nylon fiber products on a large scale. Synthetic leather enterprises are also distributed in other regions such as Anhui and Henan.

2. Japan, since the birth of synthetic leather in Europe and the United States over 50 years ago, has gradually shifted its production base to Asia, where synthetic leather products now account for about 80% of the world's output. In the 1970s, Japan alone produced 80% of the world's synthetic leather products, but this phenomenon was broken with the start of synthetic leather production in South Korea and Taiwan. Especially recently, with the rapid development of synthetic leather in China, Japan's market share of synthetic leather products has decreased from 56% in 2000 to 36.7% in 2004. Kobe Chemical Shoes, a pillar enterprise of Japanese footwear products, was also greatly affected by the Hanshin earthquake in 1995, after which market demand dropped by nearly half. This has accelerated the import of the product from other Asian countries, especially China. This situation continues in Japan today. However, during this period, there was a significant increase in demand for furniture and automotive interiors, and Japan's microfiber high fidelity synthetic leather technology remained at the forefront of the world, monopolizing the high-end market. These areas are expected to become a new growth point in the synthetic leather product market. According to the Japan Synthetic Leather Research Association, the production of microfiber leather and synthetic leather for automotive interiors increased by 31.2% compared to the previous year, reaching 6.155 million meters in 2006. In recent years, Japanese automotive leather has seen a double-digit increase, especially in the growth of microfiber suede like leather.

3. South Korea, which originally had advantages in sports shoes and clothing leather, is now in a predicament due to China's catch-up. South Korea has begun to focus on the development and market operation of automotive interior materials. In 2001, the global production of high-quality and highly simulated synthetic leather was 112.756 million square meters, accounting for 23.3% of South Korea's 26.26 million square meters. Daewoo Corporation of South Korea invested 3.5 billion yen to introduce equipment in 1993 and began producing suede like fabrics. In just a few years, the production of microfiber leather has rapidly increased and has now become the world's second-largest production base for microfiber leather.

4. Currently, there are 2300 leather companies in Italy, employing 30000 people. Among them, only 600-700 companies have complete production and processing capabilities, while the rest are only service, intermediary, and customer processing enterprises. Italian tannery enterprises are mainly distributed in the four major production areas of Vicenza, Tostana, Sorofra, and Milan, with a total of 2000 tanneries in each region, including 650, 900, 350, and 100.The export value of Italian finished leather products to 127 countries and regions accounts for about 2/3 of the total sales. 85% of Italy's leather industry imports raw hides from 120 countries and regions. In the first half of 2005, the industry's export situation continued the upward trend of 2004, with a significant increase of 18.2% in export value to 956 million euros. In the export products, synthetic leather products account for 60% of the total export trade, with an annual increase of 6.9%. From January to May 2005, the import value of leather products reached 462 million euros. Synthetic leather and other non leather products accounted for a considerable proportion of the import business, accounting for 72% of the import amount and 92% of the import quantity. Compared with the same period last year, they increased by 12.7% and 5.9% respectively. Specific products include various travel bags, handbags, and backpacks. After the economic crisis, the production of Italy's leather industry has declined, and the government of Tuscany recently released data on a significant decline in industrial production in the first quarter of 2009. Data shows that the leather industry's production has decreased by 27% compared to the same period in 2008. Italian leather is renowned worldwide for its exquisite craftsmanship combined with fashionable design. Leather labeled as "Made in Italy" means in the minds of consumers that it is of high grade, excellent quality, and a complete range of colors and varieties, belonging to the world's leading first-class fashionable leather.

  5. Other countries and regions. There are also many synthetic leather industries distributed in other countries and regions, but due to their geographical location and environmental impact, synthetic leather mostly depends on the leather industry and is difficult to count. Brazil is an important tannery producer in South America, with over 800 modern, high-tech, and high-end leather manufacturing factories, the vast majority of which have good mechanical equipment and highly skilled workers. The main markets for its exports are Italy, China, and Hong Kong, accounting for 23.45%, 17.93%, and 16.52% of Brazil's total exports to these three countries and regions, respectively. Argentina is also an important force in the global leather industry, consisting of 1400 companies, including 200 tanneries, 800 shoe factories, and 400 leather product factories. AhIn recent years, Rooting Leather has shown a vertical development trend, with leather factories directly producing leather sofas and leather seats,And meat processing is also gradually penetrating into the tanning industry. The number of employees in Argentina's leather industry is about 12000. The United States ranks first in its leather export market, accounting for 29% of the total export value, followed by China with 15%; The others are Brazil, accounting for 13%, Italy, accounting for 9%, and Mexico, accounting for 8%. Japan's exports only account for 0.03% of its total exports. Mexico is one of the top ten leather producing countries in the world, with 90% of its leather production for export. Its main export markets are the United States, China, and the Hong Kong Special Administrative Region of China. In 2004, the export volume of Mexican leather chemical products increased by 45%, and in 2005, it increased by 20% on this basis, reaching $135 million. Due to the current economic crisis, the leather industry in many countries and regions has also been affected. According to the CICB report of the Brazilian Leather Industry Federation, in the first five months of 2009, the total export value of Brazil's leather industry reached 399.6 billion US dollars, a decrease of 55% compared to the same period last year. However, data shows that compared to this year's 4Compared with May, the export volume of finished products in May increased by 11% and the export volume increased by 3%. The report of the Indian Leather Export Committee shows that the export of leather industry in 2008-2009 was stable compared with the previous year, with the total export volume of leather and leather products rising by 2% to US $3.45 billion. Türkiye's leather industry suffered heavy losses because it is a labor-intensive industry. Menemen leather industrial park in Lizmir, Türkiye suffered particularly heavy losses. According to Sener Altineezve, President of the Aegean Leather Industry Association, currently only 18 out of 95 tanneries in the region are maintaining production, and the operating rate is only 40%.

2. Comparison of production capacity, output, and technological level

    In 2008, China produced a total of 659000 tons of synthetic leather, an increase of 10.3 compared to the same period last year. With the accelerated progress of market internationalization, the production of clothing leather, luggage leather, and furniture and interior decoration leather will maintain stable growth. There are currently over 2000 synthetic leather manufacturers in China, with an annual output value of 250 to 300 billion RMB. The synthetic leather production line and output account for 70% of the world's total production, which is several times higher than the 17% share of the world's total production in ten neighboring countries and regions in Asia. In the next few years, the annual growth rate of PU in the Asia Pacific region will reach 11%. By 2010, the global PU production will reach 16.9 million tons, and the growth rate of the Chinese market will remain at around 15%. In 2012, China's PU synthetic leather production will reach 1.108 million tons, and China will become the core global PU market. On the other hand, the total output value of synthetic leather in foreign countries only reaches 100 to 150 billion yuan, but some countries have high technological content or exquisite craftsmanship with fashionable designs, and their brand reputation is in a leading position globally, such as Japan and South Korea's microfiber leather and Italy's products with a complete range of colors and varieties. Compared with similar products from advanced countries abroad, the market homogeneity of synthetic leather in China is more severe, and price competition is fierce.

With the change of people's consumption concepts and the increasing requirements of downstream product industries, the consumption demand in many application fields will become larger and larger with the improvement of synthetic leather grades and the increase of differentiated functionality, especially in the mid to high end and high value-added ultra-fine fiber shoe synthetic leather, breathable clothing synthetic leather, and environmentally friendly multifunctional synthetic leather, which will continue to expand their application fields and grow rapidly. China also understands the promising development prospects of the synthetic leather industry, so it has increased its technological development efforts to strive for the transformation from a synthetic leather country to a synthetic leather power as soon as possible. The domestic environmentally friendly water-based polyurethane synthetic leather technology has become relatively mature, and various functional synthetic leather have also been introduced one after another. At the same time, in the 1990s, China's Yantai Wanhua Company introduced the production line of indefinite island island fiber and microfiber synthetic leather from Japan's Keleli Company, which has now been mass-produced. Jiangsu Changshu also introduced the production technology and equipment of indefinite island fiber microfiber synthetic leather, and the resulting microfiber leather is mainly used for export. In recent years, the production capacity of indefinite island type microfiber leather in China has expanded, but the output is not high, only accounting for 10.8% of the world output, ranking behind Japan, South Korea and Taiwan, China Province of China. China is a huge market with a population of 1.3 billion, and even the Japanese acknowledge that China will eventually become the world's top producer of microfiber leather. The main reason for the slow development at present is the difficulty and high technical content of key technologies in the production of microfiber leather.

3. Current market competition situation

At present, there are four main problems in the market competition of China's synthetic leather industry. The first is the serious problem of the industry's "three highs" and the urgent need to solve environmental protection issues. Most of the PU pulp used in domestic synthetic leather production is still solvent based, which not only causes environmental pollution during the production process but also invisibly reduces the competitiveness of the product in terms of ecological added value. The second one is the survival crisis caused by the increase of international technological trade barriers. Economic globalization has led to increasing interdependence among economies around the world, and international trade volume has been increasing year by year. In order to alleviate the impact of foreign goods on their own and local industries, some countries and regions have formulated and implemented a series of technical inspection standards and regulations for imported goods. As is well known, in the international market, China has a very obvious price advantage in clothing, shoes, and luggage. For example, China's footwear industry currently accounts for 53% of the world's total production, and its export volume accounts for more than 60% of the world's total export volume. Synthetic leather accounts for a very high proportion in the manufacturing process of light industrial products such as clothing, shoes, and luggage. The indirect export volume of synthetic leather through these products far exceeds its direct export volume, and the specific quantity is difficult for us to calculate. The news about encountering technological barriers and trade protectionism in the above products has also frequently appeared in the newspapers, and the direct impact on synthetic leather can be imagined. The third reason is that the international financial crisis has led to a downturn in the synthetic leather industry. Under the influence of the global financial crisis, the production and marketing of the synthetic leather industry have also been severely impacted and affected since the third quarter of 2008. Although synthetic leather enterprises have demonstrated good risk resistance in the face of severe market conditions, and the economic performance has been better than expected since the beginning of spring 2009, with market demand showing a warming trend, we cannot be blindly optimistic. According to a survey of 20 synthetic leather enterprises, production in February 2009 decreased by 10% year-on-year, and the situation of foreign trade exports became more severe. According to customs statistics, there was a significant decline in synthetic leather export trade from January to February. Therefore, all enterprises should follow the principle of "maintaining growth, expanding markets, and promoting development"The requirements are to strengthen confidence and seek development, work together to explore new paths, and strive to be the first to break through. The fourth is the strong impact of foreign enterprises, which reduces the survival space of local enterprises. The most obvious example is Japan's enduring dominance in the field of microfiber synthetic leather products over the past thirty years. Although its position has declined from monopoly to occupying the largest market share, it still firmly holds a high position in the variety, style, and quality of microfiber leather. Continuously improving technology and a variety of styles and products have enabled Japan to enjoy substantial excess profits in the microfiber leather industry. These four issues may not be fully resolved in the short term, but they have accelerated the pace of upgrading and replacing China's synthetic leather industry, invisibly stimulating its continuous progress and innovation.

Future Development of the Three Synthetic Leather Industry

  1. The focus is still on China.

   It can be confirmed that in the next 10 to 20 years, the focus of the synthetic leather industry will still be on the middle and low-end development in China, South Asia, and South America. This is determined by China's current national conditions. Firstly, China's synthetic leather industry has advantages over other countries and regions in terms of technological progress, increased talent, and increased production capacity. The synthetic leather industry as a whole is growing at a rate of 12% to 15% and still belongs to the sunrise industry. The country supports its development, and the 1.4 billion gradually affluent citizens support its consumption. Enterprises and manufacturers continue to develop new technologies and introduce new equipment to promote its upgrading, which makes the overall development trend of the synthetic leather industry in China unchanged. Secondly, China's synthetic leather industry is rapidly advancing in the research and development of new products. Synthetic leather started relatively late in China, but with its current scale of development, it must be said that China is indeed a good soil for this emerging industry. As an emerging industry with development potential, the competition in the synthetic leather industry is also very fierce. There are over 2000 synthetic leather enterprises in China, accounting for two-thirds of the world's total production. Among them, 20% of synthetic leather products are exported to countries around the world. These over 2000 companies not only face competition within their domestic industry, but also strive to establish a firm foothold in international competition and avoid being eliminated. The only thing they can do is to improve quality and engage in technological innovation. Finally, due to fierce competition among industries, there will inevitably be a coexistence of consolidation, mergers, and bankruptcies, where the strong are stronger and the fittest are eliminated. The synthetic leather industry in China is bound to show stronger competitiveness.

2. Consumption of synthetic leather.

Since the reform and opening up, the development of the Chinese economy has been advancing rapidly. Now that China has joined the WTO, the living standards of its citizens have continued to improve. It is not difficult to predict that the consumption power of the people will continue to increase in the future, and with the change of people's consumption concepts and the increasing requirements of downstream product industries, the consumption demand in many application fields will become larger and larger with the improvement of synthetic leather grades and the increase of differentiated functionality. By then, synthetic leather will inevitably penetrate into all aspects of our clothing, food, housing, and transportation. China accounts for one-fifth of the world's population, and this market is very huge. We are not only a major producer and powerhouse of synthetic leather, but also a manufacturing and consumer powerhouse in its downstream industries. Of course, with the expansion of the application field of synthetic leather, the consumption of synthetic leather in countries and regions such as South Asia, South America, Eastern Europe, and Africa will gradually increase, so the consumption of synthetic leather will present a more globalized form.

4 Revolutionary changes in product technology for the future of synthetic leather industry

  1. The era of water-based PU and water-based PU synthetic leather

The concept of environmental protection and health means that the era of solvent based PU will eventually come to an end, and it is necessary to promote the use of clean and green water-based polyurethane slurry. The synthetic leather industry has been reducing the use of solvent based polyurethane slurry, while the use of water-based polyurethane slurry is gradually increasing, because water-based ecological synthetic leather not only has non-toxic properties, but also has excellent physical properties that solvent based synthetic leather cannot match, such as excellent breathability, moisture permeability, excellent wear and scratch resistance, excellent low softness, dirt and stain resistance, and a genuine leather like touch. By comprehensively utilizing the excellent physical properties brought by these water-based resins, the quality of synthetic leather can be further improved, providing a guarantee for the upgrading and replacement of the synthetic leather industry. It can be foreseen that with the basic maturity of water-based technology, the era of water-based PU and water-based PU synthetic leather is about to come. Its industrialization will first be launched in China, and in the process of replacing solvent based PU synthetic leather, it will force the market to re differentiate. The speed at which it subverts the solvent based PU era will be extremely rapid, and it will occupy the leather market to a greater extent.

  2. The prosperity of functional synthetic leather

     With the advent of the era of water-based PU synthetic leather, the end products of synthetic leather serving people's daily lives are gradually moving towards ecological and environmentally friendly. This has greatly expanded the application space of synthetic leather. At the same time, in order to meet people's demand for fashion and special fields, functional synthetic leather is bound to gradually flourish. Functional synthetic leather such as simulation, flame retardant, negative ion, waterproof and oil proof can be used for home interiors, while functional synthetic leather such as fragrance, luminescence, and color change can meet people's fashion needs. Functional synthetic leather such as noise reduction, electromagnetic shielding, and stealth is suitable for special fields. Various new functional leather base fabric materials and harmless and efficient compounding aidsThe agent will greatly support the functionalization technology of synthetic leather, change the current application status of synthetic leather, and enhance product quality. Functional synthetic leather makes the era of water-based PU more prominent, and its proportion in the synthetic leather industry will increase significantly.

 3. Post waterborne PU era

     The post water-based PU era has three characteristics: ① The leather era is gone forever. ② The eternal pursuit of environmental protection and health. ③ Renewable resources are gradually replacing petrochemical resources.

 4. New definition of synthetic leather: The demise of PU leather

    The synthetic leather at this stage, although still referred to as "synthetic", only refers to its production and manufacturing process, where all raw materials come from biological proteins and plant fibers, achieving complete regeneration and environmental protection. And the original meaning of PU leather no longer exists, completely disappearing