Singapore – Furniture Industry Outlook

OPINION – Published October 21, 2009

Furniture manufacturers see the light

Designers believe that Singapore can be the next Milan but it will have to create something special first

By ARTHUR SIM

THERE are times when yesterday’s so-called sunset industries can become the sunrise industries of tomorrow. Such has been the happy fate of Singapore’s furniture manufacturers. Like many developing nations, Singapore turned to furniture-making in the 1960s to help kick-start the manufacturing sector. But neighbouring countries quickly caught up and it soon became clear that furniture manufacturers here would not be able to remain competitive.

Businesses could have pumped in more capital to upgrade this sinking industry but many decided to either give up or move out. Bert Choong, chairman and group managing director of Nobel Design Holdings remembers how, about 25 years ago, the government had indicated to industry players that the outlook was ‘not rosy’. ‘The government encouraged us to move out of Singapore,’ he added.

With the help of government agencies such as the Productivity and Standards Board (PSB), these pioneer furniture makers moved to lower-cost countries such as Malaysia. Mr Choong, a former president of the Singapore Furniture Industries Council (SFIC), also recalls how, in the early 1990s, a group of about 20 industry players went to China to set up a ‘furniture hub’ in Kunshan.

Today, it’s a different story. Singapore’s furniture industry has staged a comeback. Prime Minister Lee Hsien Loong even recently dubbed it a ‘sunrise industry’, holding it up as example for all SMEs. James Koh, deputy chairman and managing director of furniture maker Koda believes much of this revival has to do with design. ‘The focus on design is moving the industry substantially and quickly up the value chain. This enables us to catch the latest trends and appeal to the customers’ sense of aesthetics,’ he adds.

Koda understands it cannot simply compete on price. ‘Cut throat competition is not going to be sustainable,’ says Mr Koh.

Rising output

For whatever reason, things are looking up for furniture makers. Latest figures from the SFIC reveal that the total furniture trade amounted to $4.2 billion in 2008, of which exports accounted for more than 75 percent, or $3.2 billion. Official statistics from EDB and Spring Singapore also show that between 2006 and 2007, total output for furniture manufacturing firms increased by 10 per cent, from $564 million to $619 million.

Koda represents one of the bigger players in Singapore. For its financial year 2008, revenue was close to US$55 million (although it did fall to about US$38 million in 2009, in the wake of the global financial crisis).

But while its business strategy emphasises R&D, marketing, supply chain management and quality control, the actual manufacturing takes place in Vietnam, Malaysia and China. Mr Koh says Vietnam is Koda’s most important manufacturing base. Apart from lower overheads and the availability of skilled carpenters, he revealed that, the Vietnamese government is very supportive of the industry and offers a wide range of incentives.

Koda depends on foreign support in other ways too. While it has Singapore-based designers, more recently, it has found that some foreign designers have a better understanding of markets in the US and Europe.

Even for Nobel Design Holdings, which registered an annual turnover of $44.3 million in 2008, a significant chunk of the business happens outside Singapore. In order to service US clients such as the chain store JC Penney, for instance, Mr Choong explains that the company maintains an office and warehouse in Chicago. Moreover, US designers dictate much of the design, with the furniture subsequently imported directly from China, Indonesia and Malaysia.

So while the industry may be turning around, one has to wonder whether Singapore can capture more of the value-added components. For instance, is it inconceivable to have manufacturing (and logistics) bases in Singapore? Interestingly, the president of the Italian furniture manufacturer association – FederlegnoArredo (FLA) Rosario Messina – who was recently in town, revealed that all Italian furniture is actually manufactured in Italy, even if some components are imported.

And with an annual turnover of 37.5 billion euros ($78.2 billion), and exports of close to 13.5 billion euros, the industry is an important contributor to the Italian economy. Apart from manufacturing much of the world’s high-end furniture, design capabilities and services are also an important reason why Italy is a furniture capital.

Lessons learnt

There are perhaps some lessons Singapore can draw from the Italian experience. Tan Soon Kim, deputy director for lifestyle and business services at IE Singapore notes: ‘From starting OEM to ODM (original design manufacturing), our companies began to add value to their customers by offering complete solutions across the value chain even as they try to lower the costs of production by shifting production bases to the region while maintaining the core functions in Singapore.’

He added: ‘It is important to note that (furniture companies) headquarters remain here, contributing to the talent pool and knowledge economy in Singapore.’ Andrew Ng, president of SFIC also believes that through funding by the Local Enterprise and Association Development programme launched by IE Singapore and Spring Singapore, SFIC has developed ‘many initiatives aimed at helping the local furniture industry’ which includes nurturing a quality workforce, promoting design as well as branding and marketing.

If Singapore is to become a furniture design capital, it will need more companies such as Air Division to help it build an identity. Air Division started in 1991 because its founding partners felt that Singapore lacked a design-led furniture company.

It began by serving a largely local market but this has changed, with exports now accounting for about 15-20 per cent of its business since it began export operations five years ago. According to a study by KPMG, turnover tripled between 2003 and 2006 to $2.6 million.

Air Division has to tap the Asian manufacturing base too. But that a Singapore company is actually recognised around the world for its brand and designs is encouraging. Michael Toh, managing director at Air Division claims: ‘What we offer to consumers is something that one will not be able to find anywhere else in the market.’

Singapore-based designs

Partly because of their Singapore-based design strengths, Air Division and others in the industry actually have an advantage over regional competitors. The industry has even been able to draw the attention of the Italians, who through the FLA, signed an MOU with SFIC to further trade ties earlier this month. As the Italians probably know already, a new design capital closer to the manufacturing base (Asia) will inevitably emerge.

So while Singapore may not be able to have the full spectrum of activities as a furniture manufacturer, there still appears to be a window of opportunity for it to seize the high ground as Asia’s new furniture design capital. The window, however, is small. And few understand this better than designer Patrick Chia.

Among Singaporeans, Mr Chia is a veteran of the international design scene, having first exhibited at the Milan Furniture Fair in the mid-1990s (at his own cost) to critical acclaim – Philippe Starck bought Mr Chia’s designs. Today, he is also design director of the Design Incubation Centre (DIC) at the National University of Singapore.

So it is with some authority that he can say: ‘Milan is no longer the reference point for global designers. They have been doing the same thing for the last 10 years.’

Can Singapore step in?

‘We need to be more aggressive. At the moment, we are still aping the west,’ he points out.

But he is working on bringing about change. Through the DIC, Mr Chia hopes to find new ways to create products such as the Dandella, a pointing device that can be paired with a GPS enabled mobile phone to ‘point you in the right direction’. Dandella, designed by Singaporean designers Yong-kai Tan and Priscilla Lui, received the only Gold Prize in the International Design Competition 2006 in Osaka.

Mr Chia believes Singapore can be the next Milan but it will have to create something special first. ‘The world order is changing and everything has been reset to zero. Whoever makes what is most interesting, that can resonate with the buyer, will come out on top,’ he says.

Source : The Business Times 21.10.2009