Market Outlook  

Asia’s Furniture Industry Outlook: Status and Market Prospects

By Michael Buckley MPhil FIWSc

In this review I refer only to modern mass-produced manufacturing rather than craft industries which can be found in Philippines and other parts of Southeast Asia. Meanwhile there will always be room for a craft sector, gradually eroded by technology such as CNC. The Asian furniture industry is fast dividing into those automated and those more labour intensive.

The value of the global furniture market is estimated at around US$430 billion – depending who you talk to. I like to quote CSIL in Milan as an authority. But who really knows how much of that is wood and does it really matter in the context of predicting the furniture industry’s prospects? Of course, the use of wood does matter a great deal when it comes to considering the environmental impact of not using wood. And what we can say is that there is a gradual, if fragile, upturn in the global economy and that always helps the furniture industry. Notice in the chart below that over 50% of global consumption is China and USA. Data on the amount of furniture which is wooden, such as the 80% quoted by Malaysia, does not really take into account the effect of mixed materials. So we can only talk about the general direction of the wooden furniture industries.

Current Global Furniture Consumption (Source: CSIL Milan)
Current Global Furniture Consumption (Source: CSIL Milan)

What we also know is the value of global furniture trade is approaching $150 billion and with China accounting for almost 40% of production it is no secret which country influences raw material supplies and furniture markets. The forecasts for global consumption in 2017 and 2018 contain uncertainties, mainly due to U.S. trade policy under the current administration and also political problems in Europe.

So with only $150 billion traded out of $430 billion manufactured, one can see the importance of domestic markets especially in Asia in general and China in particular – and perhaps to some extent in USA. Right from the outset I venture to suggest that furniture markets are price-driven more now than ever before. Thus manufacturers are under great pressure to improve efficiency and yields and to cut costs.

Malaysin upholstered stool - at the price of a tee-shirt

(In Kuala Lumpur in 2016 I suggested that furniture is in danger of following the clothing market – with downward trends in prices. I cited the case of a Malaysian-made upholstered stool offered to wholesalers at US$2.90 as an extreme example. What remains true today however is that the furniture market is price-driven, except at the very top end.)

Despite the current focus by China on its domestic market, China is still the largest exporter of furniture, although not all wood! For example, China is number one supplier of furniture imported by Malaysia.

Then let’s look at furniture manufacturing bases and markets in Asia. I will focus on five ‘M’s as some of the key issues: Manufacturing, Management, Materials, Markets and Money.

With labour varying from foreign worker dependence in one country to self-sufficiency in another means that it is difficult to compare one country with another. Lack of labour eventually leads to investment in automation and innovation. But as furniture manufacturing is both capital and labour intensive, like no other, manufacturers with the most adequate labour force, balanced with capital investment, will succeed best. Efficiency, by improving yield, has always been an issue but with technology can be further improved – particularly with high speed optimisers and data gathering of raw materials. Recent investment signals from woodworking machinery manufacturers from Taiwan, Germany and Italy currently indicate that some Asian industries (Vietnam and Indonesia) are gearing up for growth and improved efficiency in furniture manufacturing.

Management methods vary so much in Asia that it is almost impossible to draw comparisons, but Q.C. needs to be, and is becoming, ever more stringent with buyers’ inspectors operating in plants almost like staff and should be welcomed if claims are to be avoided. Moisture control of materials and finished products depends on ambient climate and therefore location of manufacturing. ISO standards and attention to VOCs as a key issue needs no introduction these days. The hot topic today is Due Diligence (DD), not only on product out, but also increasingly for materials inwards.

The furniture industry is ever more dependent on fats grown, small diameter plantation species such as rubberwood and acacia, but international furniture product markets are not always receptive. This is not always helped by misleading names such as ‘Malaysian oak’, for example. (See – ‘Finish Now’ journal by MIFF, August 2017 page 28 ‘Update on the Malaysian Furniture Industry’) I thought that had been killed off by legal threats from the EU years ago. Increasingly, materials other than wood such as metal and glass are being incorporated into modern style furniture. Pigments are also increasingly common in painted and stained furniture. There can be many approaches to colours which are increasingly supplanting the look of raw wood. Packaging is the great protector of furniture, but a cost along with freight, that requires analysis. Certification, or at least DD, of both materials and finished products is now a fact of life in markets outside Asia and maybe soon in Asia.

The most pertinent point of the data in this table is the absence of China, confirming it is increasingly a domestic market. China, for example, is only Malaysia’s 10th market.

The world economy currently shows some signs of improving from the crisis of 2008 and the dip in 2015 but is still facing major issues on governance, exchange rates and uncertainty of interest rates for 2018 onwards, which could easily affect consumer purchasing. No forecasts here - sorry!

Red Oak table by Italian designer Mateo Thun

Design ultimately determines what sector and at what level furniture manufacturers operate. I doubt there are many that do not believe Asia needs to up its design game, particularly in developing home-grown design talent and capabilities. However there are, in my personal view, still too many manufacturers giving scant attention to their design capabilities.

“For the year 2018 consumption of furniture in the 100 countries is forecasted to grow by about 3.5% in real terms worldwide. The fastest growing region continues to be Asia and Pacific, with all other regions growing between 1% and 3% in real terms”. CSIL - Milan

I certainly agree with that statement and I see huge growth continuing in Vietnam and for all Asian producers who can succeed in the Chinese market.

So turning to trends there are a number of discernible changes. Painted and stained furniture is increasing and so wooden furniture is showing less wood.

An insight into the new stain colours, that finishing manufacturers are marketing, provides a clue and, at the end of 2017, this colour range below was the offering from one of the leading manufacturers of finishes, with ‘clay’ and garnet likely to be the most popular.

In fact it is probably true to say that only high-end furniture, with design at its heart is not price-driven. Many furniture trends develop from top designers down and to this extent Asian manufacturers are still looking to Italy for the lead.

Metal and veneer furniture is also an increasing trend.

The industry, as always, is facing challenges – of which I see raw material supply and increasing government legislation as the two most important. But keeping up with trends is vital, but so is anticipating what buyers will want. In the future this is likely to focus on better furniture in the middle market. A recent example was the increasing need for smaller space furniture. Ask some American and European companies why they went out of business and while many will cite cheaper labour elsewhere, especially in Asia, falling behind on manufacturing innovation and design may be nearer the truth. Finally online and virtual shopping may become a big disrupter for the industry.

However in conclusion the bottom line for Asia is simply that the current status of Asia’s furniture production and markets appears better than anywhere else in the world and is set for at least modest growth, if not more.