Established more than six decades ago, Tainan Spinning Co. Ltd. has emerged in recent years as a material supplier to many international luxury brands. After surviving the global financial tsunami and a sharp drop in orders at its Vietnam plants, the company has successfully transformed itself under its third-generation management team.
On the evening of March 10, a long line of luxury sedans queued up outside Tayih Landis Hotel Tainan for the chairmanship inauguration ceremony of the Yi Tsai Club. President Tsai Ing-wen deliver remarks at the event, which was attended by many leaders of industry heavyweights based in southern Taiwan including Lo Chih-hsien of Uni-President Enterprises Corp., Wu Yung-feng of Tong Yang Industrial Co. Ltd., Wu Chun-i of Ta Yih Industrial Co. Ltd. and Chen Jen-zhao of Poya International Co. Ltd. A conservative estimate puts the combined capital of the club’s 66 corporate members at over NT$100 billion (US$3.29 billion).
On stage, Tainan Spinning Co. Ltd. Chairman Hou Po-ming, who took over as the club’s 15th chairman, sang a popular Taiwanese song. Off stage, he voiced strong support for Tainan upon assuming his new post, proposing a raft of suggestions to President Tsai for the southern Taiwan metropolis, including building a rapid transit system and tourist pier. In response to questions regarding TSC’s collagen yarns, Hou jokingly said that his latest hobbies were to “browse the T.S. Mall and search for investment targets.” But he immediately added in a serious manner that “now I’m only responsible for charting TSC’s broad direction and strategies and leave the company’s daily operations to the general manager.”
Chen Hung-mo, who has worked at TSC for 18 years, took over as general manager in 2015 and quickly transformed the firm’s long-held status as a material supplier making meager profits. TSC’s new fabric offerings are becoming materials of choice for international luxury brands such as LVMH and Armani.
What makes the materials developed by Chen Hung-mo so special that they have attracted the attention of these industry heavyweights? The key lies in collagen yarns, which have become an instant market sensation. These yarns produce a golden shine without the need for dyeing or finishing, have a lustrous finish like silk or cashmere, and possess properties like high water retention and skin-friendliness at a comparatively low cost. An executive from Victoria’s Secret even came to Taiwan to take a closer look at the product.
According to industry sources, gross margins for collagen yarns are three times those of traditional cotton yarns or chemical fibers, though TSC would not confirm this. In addition, TSC is the only company in the world that possesses the critical know-how to produce protein-based filaments. While the market for these products is the early stages of development, the materials stand a very good chance of becoming a big revenue generator for the company.
Inside the TSC plant, spinning machines roar continuously and golden yarns as thin as hair are quickly woven into yarn cones. The key ingredients in TSC’s collagen yarns, which are marketed under the brand name UMORFIL, are a cause of much discussion among global luxury brands. They come from fish scales, which have long been considered aquaculture waste.
The story of the yarns’ creation began five years ago, when James Hou, founder of Camangi Corp. and also a native of Tainan, hoped to develop apparel with collagen peptides extracted from fish scales, but could not find a textile partner. He finally teamed up with Chen Hung-mo, then TSC deputy general manager, and the two spent five years experimenting before achieving success. “Were it not for Chen’s support, we would still have a very long way to go,” James Hou said.
Recalling those days, Chen Hung-mo said, “We tried several hundred formulas just to combine collagen peptides with rayon fibers. If the temperature is too high, the collagens will burn. If the temperature is too low, fusion is impossible.” Last year, the company successfully developed the technically challenging protein-based filaments, which soon became a hot topic in the industry. “We launched a line of scarfs made with this new fiber on our shopping site, and they sold like hotcakes while drawing a lot of inquiries,” he said, beaming with pride.
In contrast to TSC Chairman Hou Po-ming, who is well known in the industry, Chen Hung-mo seldom speaks to the media. Despite his height of 180 centimeters, he has always maintained a low profile on public occasions, keeping himself out of the spotlight.
Chen is one year younger than Hou. In business, they share a boss-subordinate relationship, but in private they are cousins who grew up together. Hou’s mother is Chen’s aunt, and the Chens, like the Hous, are among TSC’s founders. Chen has a special feeling for TSC because he spent a significant portion of his childhood at the company.
After obtaining a master’s degree in material sciences in Japan, Chen returned to Taiwan to follow in his cousin’s footsteps, working for the Uni-President Group at entry-level positions in product development and project planning. “My job involved either shuffling papers or cleaning up the mess created by some failing department,” he said jokingly.
The young and feisty Chen was disgruntled about the situation. “But my father told me that it requires a lot of knowledge to shutter a business, too.” Chen learned to let go of the grudges and in the process realized that knowing when to halt operations is an important business strategy. At the invitation of Hou, Chen joined TSC in 1999 as an assistant manager handling exports to Hong Kong, the most important market for the company at the time.
Right before the 2008 financial tsunami, Chen, who possesses keen business instincts from years working in the industry, sensed that a storm was on the way. He strongly suggested to Hou, then TSC general manager, that the company get rid of its whole inventory as soon as possible. “We offered a 70 percent discount and sold all our stock within a month. Many colleagues disapproved of our decision.”
The global financial tsunami started one month later, leading to a market crash and causing yarn prices to tumble more than 50 percent. Many textile firms were hit by piling inventories and forced to put workers on furlough. “We did not have even one day of furlough; instead, we were able to restock raw materials at half their normal price and keep production going.” Not only did TSC weather the storm, but the company made a profit, with Chen taking the credit.
Another crisis occurred not long after. In 2010, a miscalculation caused TSC’s Vietnam factories to incur an inventory loss of NT$300 million, wiping out the plants’ profits and leaving them in the red for the first time since their establishment five years previously.
As a matter of fact, TSC is not just the leading cotton yarn manufacturer in Taiwan. It is also the biggest producer of blended yarns in the world. TSC’s Vietnam plants, the company’s main production facilities, boast a combined capacity of 680,000 yarn cones and contributed around 40 percent of the company’s 2016 revenues of NT$19.45 billion. The importance of the Vietnam plants goes without saying.
“I had been giving out warnings that cotton prices were rising way too high. Hou was quite anxious, too. But there was nothing he could do because he wasn’t in charge of that part of the business.” After the crisis, an exasperated Hou took over management of the Vietnam plants and sent Chen to salvage the situation.
Chen said he was dumbfounded after arriving in Vietnam. “Orders were down by 90 percent compared to their peak, and there were 100,000 yarn cones in stock.” Chen sorted and priced the products according to their quality, and managed to clear out 60 percent of the inventory within six months. After another three years of improvements and modifications, Chen finally brought the business back on track.
Despite being a member of the third generation of the “Tainan Gang,” Hou is amiable, nostalgic and frugal. He wears a budget watch, his shoes cost only around NT$1,000, and one of his ties is more than 30 years old. Chen is equally thrifty, carrying with him the same pen pouch for more than 10 years. According to people in the industry who have known him for more than a decade, Chen does not like business entertainment activities, but has a passion for nature and will spend as much time as possible in the suburbs during holidays or weekends. In addition to enjoying mountain climbing, Chen has tried to restore indigenous fish species inside TSC’s premises. With years of experience in trading commodities like cotton, Chen has also accumulated extensive knowledge about the environment, earning a reputation as a climate expert among his acquaintances.
In recent years, Hou has shifted his attention to the reutilization of TSC’s idle properties, and the company is in the midst of a three-stage development project to transform its Houjia plant, which sits on 36,000 pings (29.4 acres) of land, into a commercial zone featuring a shopping mall, a hotel and luxury apartments. The first stage of the project involved building the T.S. Mall, which commenced operations in 2015 and reports annual revenues of around NT$5.5 billion. With the second stage set to begin soon and expansions of TSC’s Rende plant underway, Hou is charting TSC’s development for the next decade. “Revenues at our Vietnam plants are approaching NT$10 billion, and in Taiwan we have extended our reach to sectors related to daily life. In the future, we will continue looking for suitable investment targets around the world like shopping centers and hotels, and we’re planning to set up an offshore holding company.”
As for TSC’s core business, it is now in Chen’s hands. And he is fully aware that TSC, which started out in the textile sector, has much to do if it is to keep its roots in Taiwan.
Given growing environmental awareness around the globe, Chen Hung-mo is betting on “slow fashion,” which places a premium on comfort, natural materials and recyclability. After five years in development, UMORFIL has opened another door for TSC. But for ardent mountaineer Chen, collagen yarns are only the beginning. Running a business is like conquering a summit and Chen’s challenge has only just begun. (E)
[By Lin Fung-chi / tr. by Meg Chang]