A key year
Those who master both raw materials and technology will be at the forefront of the industry: this is an unchanging law of business. Yet for sustainable operations, the true secret is constant adherence to good quality. The elder and younger Shiue were clear that the entry threshold for manufacturing the neoprene sponge and fabrics needed for wetsuits and related goods was not very high; they needed high quality to find favor with customers. Their thinking was simple: "If our quality is the same as that of the world's foremost producer but our price is lower than theirs, then there's no reason to fear that no orders would come in."
If control of raw material was the first step toward the Shiues' global victory, then setting up a factory overseas was the indispensable second step.
"There really were a lot of orders. Also, among our more than 500 customers around the world, only 20% had their own design departments. The others gave us ODM orders." In 1988, while shouldering 65% of the world's dive wear production, SCHI extended the battlefront of their business overseas, setting up factories in Thailand and China as well as a subsidiary in Hong Kong.
It was 1997, and the East Asian financial crisis engulfed everything. Despite this, it was SCHI's most prosperous year. When Shiue and Shiue reviewed the business figures for that year, they found that the world's ten biggest brand-name wetsuit companies had become their customers, with SCHI's OEM-produced wetsuits and related goods covering over 40% of the world's market. From then on, this little company that rose to fortune in Taiwan's countryside was at the forefront of the world. It became known as the Sheico Group, the industry's leading manufacturer.
Currently, 99% of Sheico's products are sold overseas to more than 500 customers. The biggest market is the US (40%), followed by Europe (30%), with the remaining 30% made up of Australia and Japan. Sheico does not have its own brand, instead relying on OEM and ODM orders for well-known manufacturers. Its global market share has reached over 65%.
Compared to some companies, which may bask in the glory of being the world's best, Shiue and Shiue are well aware of the risk that the fortunes of a global market may change in the blink of an eye, and are seeking ways to overcome limitations to market growth.
"Frankly, Sheico didn't grow big overnight. At first we had a speedy annual growth of 20%, and we became the world's number one without realizing it. But the market for wetsuits and related goods is only so big. Our market share is nearing saturation point, and future growth is limited. Moreover, in 2005, mainland Chinese companies began grabbing orders due to their low production costs, and the market sank into a price war. Selling at a loss has become ever more serious. We can only find new room for growth if we expand into new areas," says the younger Shiue, earnestly describing the rationale for Sheico's next battleground.
Yet if a company waits for a crisis to happen before considering a change in tack, it's too late. As early as ten years before this "red ocean" (i.e. saturated market) war began in the neoprene sheet market, Min Shiue was already busy scouting out possibilities for Sheico's future.
One day in 1993, Min Shiue was on a routine monthly tour of overseas factories and customers. While visiting with customers he found that orders were booming for DuPont's artificial elastic fabric Lycra, and supply was unable to meet demand. Stretch fabric has broad applications, and with a greater market than wetsuit neoprene, it has greater added value. Based on a market sensitivity built over the years, Min Shiue had an idea: "Why not enter the elastic fiber market?" In April 1996, Sheico's first spandex production line started up. But then in the fall of that year, Sheico was hit by a major fire that jeopardized their business. A boom and a bust happened at about the same time.
Sheico started in an old Ilan sugar mill. In 1986 the company opened a subsidiary in the US, followed by a factory in Thailand in 1988. Now there are nine factories around the world, including those in China.