No industry can beat mask manufacturing when it comes to reaping unexpected benefits from China’s fight against the pandemic.
According to statistics from Tianyancha (天眼查, a business data search platform), as of 18 March 2020, there were 47,000 enterprises in China manufacturing masks among their other products. 8950 of these enterprises were established after 25 January, following the coronavirus outbreak.
The allocation of resources is dependent on the market. At the start of the outbreak, there was a severe shortage of masks that resulted in a mask-buying frenzy. Shrewd businessmen saw the business opportunity immediately, rushing to start production lines manufacturing masks.
Millions of people joined in the frenzy and hyped up the market. Prices of mask-related production materials and mechanical equipment began to skyrocket...
There are largely three main groups of enterprises in this mask production army: one, factories that originally produced masks; two, medical and health industries related to mask production; and three, enterprises unrelated to mask production but boast of strong financial power like Gree (a major appliance manufacturer based in Zhuhai, Guangdong) and BYD (an auto-manufacturer based in Shenzhen).
Thus came their immediate windfall: an enterprise could produce 500,000 masks on a daily basis with a cost price of roughly 1 RMB (approximately S$0.20). Sell them at 3 RMB apiece and the enterprise earns a profit of 1 million RMB in a single day.
In the process, the growing mask-manufacturing industry formed a thick and long value chain, and hundreds of mask-related resources chat groups sprang up on the QQ instant messaging platform, selling masks, mask-making machines, and melt-blown fabric (key raw material for masks). The many vendors were people from all walks of life, including dishonest people looking to make huge profits. Millions of people joined in the frenzy and hyped up the market. Prices of mask-related production materials and mechanical equipment began to skyrocket, with a single piece of mask machine selling for 50,000 RMB.
Entering mid-March, the actual number of masks produced could possibly reach an estimated 200 million.
Just like that, a mammoth mask-manufacturing industry bubbled to the surface, and the production that was originally meant to meet a desperate demand gradually lost its modest aims. However, following an increased supply of masks in the market, the booming mask-manufacturing industry might not last long.
Presently, there are sufficient masks in China’s domestic market.
According to statistics released by the National Development and Reform Commission on 2 March, as of 29 February, a total of 116 million masks — including normal masks, disposable surgical masks, and disposable N95 respirators — are produced in China daily.
Entering mid-March, the actual number of masks produced each day could possibly reach an estimated 200 million. Currently, consumers can buy masks in limited quantities from regular e-commerce platforms and drugstores. Disposable surgical masks are mostly priced between 2.50 RMB and 4 RMB.
Industry experts generally believe that the peak demand for masks will last until April. Be a little more optimistic and extend that until May or June — but what about the second half of the year then?
Following the implementation of differential containment measures in different regions, many mildly-hit regions will gradually stop wearing masks to work, reducing the demand for masks. Consumers need only stock up on a small number of reusable masks for emergency use.
Chairman of China Textile Commerce Association’s safety and health goods committee Lei Limin believes that demand for masks will fall should the coronavirus outbreak be radically controlled after April. Industry experts generally believe that the peak demand for masks will last until April. Be a little more optimistic and extend that until May or June — but what about the second half of the year then?
Until then, many mask-manufacturing enterprises — especially the small and medium enterprises that came into the picture much later and do not possess strong foundations — would have to face closure when they have a surplus of masks and profits begin to plunge, for that marks the start of a crisis.
...to enter the US market, one has to first gain approval from the Food and Drug Administration; to enter the European Union market, a CE certification mark has to be obtained.
The situation with exports is not optimistic either. Firstly, national conditions vary in China and elsewhere, and foreign countries do not find it necessary for each citizen to wear a mask as a containment measure. Some European and Western countries do not encourage healthy people to wear a mask, reserving them only for patients and medical staff. Thus, as compared to China, there is little demand for masks in foreign countries.
Secondly, quality controls for exports are kept at a high standard: to enter the US market, one has to first gain approval from the Food and Drug Administration; to enter the European Union market, a CE certification mark has to be obtained. Moreover, with multiple layers of checks and approval, and considering the bureaucratic systems of these organisations and their procrastinating nature, by the time a certification is obtained, the pandemic has probably ended.
Importantly, the Achilles heel of China’s manufacturing industry is the tendency of enterprises to jump on the bandwagon. As quickly as a new sector gets hyped up, it dies again.
However, there is a lot of uncertainty in the Covid-19 coronavirus. China has entered the crucial stage of guarding against imported cases whilst guarding against an internal spread in its containment measures, while the world has just started to experience the spread of the outbreak in various regions. Masks are necessary resources in pandemic containment and all scenarios remain possible.
Perhaps mask manufacturing will continue to flourish for a period of time, but enterprises have to prepare for what comes after the frenzy. With the exception of leaders in the mask-manufacturing industry, it is unwise for other industries that were late to the game to bank their survival on the production of masks.
Importantly, the Achilles heel of China’s manufacturing industry is the tendency of enterprises to jump on the bandwagon. As quickly as a new sector gets hyped up, it dies again; while one foot is on the accelerator, the other foot is stepping on the brakes. Will mask manufacturing repeat the same mistakes of China’s manufacturing industry many years ago? We shall wait and see.
Note:
According to a New York Times article "The World Needs Masks. China Makes Them, but Has Been Hoarding Them." updated on 2 April, China is a main producer of masks but it has not resumed shipping them outside the country until very recently. American mask-making company 3M is quoted in the article saying that its factory in Shanghai had been making masks for sale within China even before the outbreak, but the company was not able to comment on when masks from China might resume export.
Chinese officials have dismissed such allegations. In a press conference of the Joint Prevention and Control Mechanism of the State Council held on 5 April, Chinese officials said China has exported 3.86 billion masks, 37.5 million pieces of protective clothing, 16,000 ventilators and 2.84 million Covid-19 testing kits since 1 March, with orders to more than 50 countries.
3M and the Trump Administration announced on 6 April that 3M will be exporting 166.5 million N95 masks over the next three months to support healthcare workers in the US. The masks will come from its factories in China.
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