ESSENTIAL SOURCING GUIDE: The Turkey apparel sector

Just Style takes an in-depth look at Turkey's apparel sector, which is quickly becoming a go-to sourcing country for Europe and beyond and hopes to become one of the three largest suppliers in the world.

By Paul Cochrane

Turkey's apparel manufacturing sector, which is the world's fifth largest garment exporter, after China, the European Union, Vietnam and Bangladesh has rebounded from the Covid pandemic and set its sights on overtaking its rivals. The industry has been investing in new machinery and capitalising on the trend for near-shoring.

"The Turkish apparel industry is moving to a point where it aims to be one of the three largest suppliers in the world. The industry aims to increase the sustainability level of the sector, increase the added value in production, enhance the design and fashion capability of the industry and raise the unit export price in apparel exports," said Mustafa Gültepe, chairman of the Istanbul Apparel Exporters Association (İstanbul Hazır Giyim Ve Konfeksiyon İhracatçıları Birliği – İHKİB).

The sector was hit hard by the Covid pandemic in early 2020, with some 80% of factories stopping production for some three months, and an estimated US$3bn in inventory put on hold, according to Turkish Clothing Manufacturers' Association (TGSD, Türkiye Giyim Sanayicileri Derneği) data. "In the first few months of the pandemic, the exports [by value] of the apparel industry fell about by 30% but then recovered," added Gültepe.

By the end of the year, Turkey had managed to rebound, with exports down by 3% [by value] on 2019 figures.

This was primarily due to orders for personal protective equipment (PPE), as well as orders for casual-wear and knitwear performing better during the pandemic than for more formal wear.

Turkish apparel exports were worth $17.7bn in 2019, $17.1bn in 2020, and $20.3bn in 2021, a growth rate of 18.3%, according to İHKİB figures.

"Overall, Turkey's textile and clothing industry has done quite well as a result of opportunities created by Covid, and also an improvement in its competitiveness due to the weak [Turkish] lira," said Navdeep Sodhi, partner at the Switzerland-based Gherzi Textil Organization. In 2021, the Turkish lira lost 44% of its value to the US dollar, according to Reuters, which was a boon for exports to the US, as well as its main export market, Europe. "What we have seen is that Gherzi's [Turkish] clients are investing and their production rates have gone up," said Sodhi.

Turkey's apparel sector benefits from the rise in near-shoring

Turkish manufacturers have also benefitted from the rise in near-shoring, with European buyers wanting to source from the country due to its proximity, and reduce reliance on South Asian and Far East manufacturers.

"The longer impact of the pandemic on the Turkish apparel industry tends to be positive because the buyer countries and buying groups tend to further supply from near-shore suppliers, which will increase the market share of Turkey in the European market. The disruption in the supply chains and decline of supplies from China will help Turkey to increase its share in the global apparel market," predicted Gültepe.

The worldwide long-term trend for diversifying the supply chain has been accelerated by the pandemic, as well as recent moves made by the US against China's Xinjiang province over forced labour concerns. In January 2021, the US Customs and Border Protection agency issued a 'withhold release order', banning cotton and cotton products produced in Xinjiang. This was followed in July (2021), by the US government updating its Xinjiang Supply Chain Business Advisory, noting intelligence about coercive measures being taken against Uighurs. The north-west Chinese province accounts for 20% of global cotton supply.

"International buyers are keen to replace Xinjiang cotton, and Turkey offers that opportunity," said Sodhi, who stressed Covid-linked lockdowns of the Chinese economy as a key encouragement for buyers to diversify sourcing.

Indeed, Turkey has invested in cotton cultivation and has adopted more sustainable practices. For 2021-22, cotton production is forecast at 825,000 tonnes, of which 100,000 tonnes is forecast to be produced according to Better Cotton Initiative (BCI) standards, which promote greater and more consistent quality as well as sustainability. Overall cotton consumption in Turkey is much higher, however – at 1.6 million tonnes, according to the US Department of Agriculture (USDA)'s Foreign Agricultural Service. It predicted that Turkey's cotton consumption in 2021-22 will increase to 1.8 million tonnes from 1.4 million tonnes in the 2019-20 season, 60% of which will be met by imports.

Turkey's apparel sector eyes US opportunity

Turkey is an important market for imports of US cotton, added Sodhi. "Turkey's consumption of cotton this year is forecast to grow more than 10%, which considering a 3% world [growth] level, it is growing three times the global average. There is a significant increase in Turkey's mill consumption of cotton," said Sodhi.

In the meantime, Turkish textiles and garment manufacturers have upped exports to the US over the past two years, jumping 43% from $1.8bn in 2019 to $2.8bn in 2021, according to the US's Office of Textiles and Apparel (OTEXA) and İHKİB figures.

Until 2005, the US was a large garment market for Turkey, but exports dropped by some 50% following the end of the World Trade Organisation's (WTO) Multi-Fibre Agreement's quota system, which had protected exports from middle income countries such as Turkey against competition from lower cost competitors, such as Bangladesh and China. While Turkey's share of the US garment market is currently less than 1%, the country is now aiming to raise exports to $5bn a year to carve out some 4% to 5% of the market, said Haldun Boz, a board member of İHKİB. The association claims some 40% of the Turkish garment industry is ready to export to the US market. At present, Europe accounts for more than 70% of garment exports, according to İHKİB.

Given Turkey's geography and the fact the country has a Customs Union with the European Union, this is not surprising. Overland deliveries can reach the UK in seven or eight days, and within a week throughout Europe. By ship, Turkish exports can reach the US in 19 days. Air freight is also being expanded through national carrier Turkish Airlines, said Vittorio Zagaia, CEO and vice president of Galata Transport and Trade, in Istanbul.

An integrated vertical textile and apparel industry

The Turkish industry's appeal to buyers and retailers is partly driven by it being among the very few countries to have an integrated vertical textile and apparel industry, from fibre to yarn, fabric to final apparel products, and a finishing industry. The Turkish apparel industry has developed infrastructure and developed sub-sectors of yarn, fabric, knitwear, woven fabric, non-wovens, finishing, and apparel of all types, men and women's wear, denim, socks, sport and active wear, lingerie and nightwear, noted the İHKİB. The industry has been traditionally more competitive in knitwear and denim than other sectors, but woven and other sub-sectors are developing. Technical and innovative textiles are also being produced in the country.

The industry has been steadily modernising over the past decade, including investing in industry 4.0 tech, such as German brand Hugo Boss, which has an advanced factory in İzmir, western Turkey. The facility uses more than 1,600 tablets to track production in real-time and is connected via artificial intelligence (AI) with semi and fully-automated machines and robots. The country's clothing and textile sector is leveraging "industry 4.0, and in technical textiles, companies are exploring opportunities," said Sodhi.

Indeed, there has been a notable rise in shipments of textile machinery over the past few years.

In circular knitting, Turkey's cumulative imports were about 13,000 machines between 2011-2020, importing some 2,300 machines in 2020. In weaving, cumulative imports of shuttle-less weaving machines were about 27,000, with 3,700 machines imported in 2020. In spinning, imports of ring spindles during 2011-2020 were about four million, with 400,000 ring spindles imported in 2020, according to International Textile Manufacturers Federation (ITMF) figures. "Apart from the Indian subcontinent, Turkey is the hottest market for shipments of new ring spindles," said Sodhi.

Such overall investment is reflected in sales of Switzerland-based Rieter's short-staple spinning machines to Turkey, which grew 49% in 2021 on the previous year, from Swiss Francs – CHF122m ($132.2m) to CHF182.3m ($197.7m), according to a Rieter note.

"Across the textile value chain, on average, Turkey is installing 400,000 new ring spindles, 3,000 shuttleless weaving machines, and 2,000 circular knitting machines every year. And these investments increased post-Covid-19," said Sodhi.

In primary textiles production – spinning, weaving knitting and finishing – Sodhi described Turkey as being "quite strong." And "with this increased level of automation and modernising, they are maintaining an edge in downstream products, for home textiles as well as for ready-made garments."

Turkey aims to overtake Pakistan as leading digital printer

Turkey is also investing in digital printing, with there being some 350 to 370 multi-scan printers in the market, and around 3,000 rotary printers. The country aims to overtake Pakistan as the leading digital printer if it adds capacity over the next five years, to reach around 500 digital printers, according to Cengiz Kahraman, managing director of Spot Textile, in Istanbul, an integrated textile manufacturer and finisher.

Turkey's positioning and advanced technology is attracting US and European high-end apparel brands. To Gültepe, one of the most important transformations underway in the apparel industry to secure long-term orders with high-end brands and retailers is the digitalisation in production and supply chains. This is happening at the same time as a green transformation to reduce the carbon emissions and environmental impact of the industry. Such projects are partly financed by the EU, using budgets such as the EU's Instrument for Pre-accession Assistance (IPA) II and III (2021-2027) Programming Frameworks.

"All efforts and new investments within the industry are bringing dynamism in line with the current trends in the global apparel value chain. New projects are developing and in 2021, the industry's investments doubled over recent years and reached a peak," said Gültepe.

Recycling is another important trend within the industry over the last decade: "We see Turkish companies investing in circular textiles and getting into recycled materials. They are also upgrading infrastructure, with less waste and water usage. This should help long-term competitiveness as a sourcing hub for Europe and the US," said Sodhi.

While the industry is modernising in western Turkey, where most of the sector is headquartered, the east of the country is being developed as a second-tier production hub, primarily due to lower wage demands than in the West. Larger companies are transferring older machinery eastwards. There is a [government] support scheme for the new apparel investments in the less developed regions of Anatolia. There is also state aid for marketing, promotion, and research," explained Gültepe.

Istanbul is the trade, exports, fashion and design centre of the industry, while the major manufacturing centres are in western Anatolia, in the cities of Bursa, İzmir, and Denizli. In eastern Anatolia, production is clustered around Diyarbakır, Malatya and Batman.

There are some 40,000 apparel manufacturers nationwide, employing about 669,000 workers. Combined with the retail sector, the industry employs some 1.5 million people, according to İHKİB, which represents 10,000 active member exporter companies.

On the textile production side, 497,000 staff are employed in 19,500 companies. Around 20% specialise in finishing, with other manufacturers within the sector fully integrated, including finishing facilities, according to İHKİB.

Labour relations have been stable in Turkey, with workers being represented by various labour unions in the textile and apparel industry, including the Turkish Textile Industry Employers Trade Union (TEKSIF – Türkiye Tekstil, Örme, Giyim ve Deri Sanayi İşçileri Sendikası). There is quite a high level of governmental support and activity related to the sector, primarily through the ministry of trade and the ministry of industry and technology.

There are also 61 semi-governmental exporter associations that act as a bridge between government and the industry. Exporter associations representing the apparel industry in Anatolia include the Aegean Apparel Exporters Association (EHKİB), Uludağ Apparel Exporters Association (UHKİB), Denizli Exporters' Association (DENİB) and Akdeniz Apparel Exporters' Association (AHKİB).

Looking ahead, Turkey is positioning itself to be a major garment supplier to not only Europe and the US, but also the Middle East, Central Asia and Africa markets, including for its own growing domestic retail brands, such as denim specialist Mavi and broad-based clothing label Colin's. "Across various segments of the value chain Turkey is repositioning itself. We see tremendous opportunities for Turkey in conventional textiles but also technical textiles," concluded Sodhi.