Analysis of Core Supplier Concentration Risks for Uniqlo

Based on the collected information, I will provide you with a systematic and comprehensive report on core supplier concentration risks for Uniqlo.

---

Uniqlo, as a world-leading apparel retail brand, has a supply chain with prominent

characteristics. According to academic research literature, Uniqlo’s suppliers are mainly distributed in the following seven countries [1]:

Country/Region	Supplier Share	Remarks
China	~60%	Far exceeds the total of other countries
Vietnam	Second largest	Key production base
Bangladesh	High	Labor cost advantage
Cambodia	High	Capacity expansion area
Indonesia	Medium	Southeast Asia layout
Japan	Low	Domestic production
Thailand	Low	Regional supplement

From the perspective of supply chain risk, the 60% share of Chinese suppliers is clearly too high, and the regional concentration risk is quite prominent [1].

Uniqlo has a high degree of dependence on core suppliers. Taking its important partner

as an example:

• Customer Structure
  : Shenzhou International’s top four customers include Nike (29%), Uniqlo (20%), Adidas (20%), and PUMA (10%) [2]
• Collaboration Depth
  : Shenzhou International is Uniqlo’s core manufacturer for knitted sportswear and casual wear, and the two parties jointly developed functional fabrics such as Airism [2]
• Vertical Integration
  : Shenzhou International integrates four processes: weaving, dyeing and finishing, printing and embroidery, cutting and sewing, with strong supply chain integration capabilities [2]

Approximately

, with China being its primary production base [1].

---

: Systemic risks arising from excessive concentration of suppliers in specific regions

:

• Geopolitical Risks
  : Macroeconomic factors such as China-Japan relations and Sino-US trade frictions may affect supply chain stability [3]
• Policy Change Risks
  : Rising labor costs in China, stricter environmental policies, tax policy adjustments, etc. [4]
• Public Health Risks
  : Supply chain disruptions caused by the 2020 COVID-19 outbreak in China [1]
• Natural Disaster Risks
  : Earthquakes, floods and other natural disasters may cause regional production disruptions

Fast Retailing clearly stated in its risk disclosure document:

[3].

: Loss of bargaining power due to over-reliance on a small number of core suppliers

:

Risk Type	Risk Description	Potential Impact
Cost Pass-Through Risk	Suppliers may increase procurement prices due to rising costs	Profit Margin Pressure
Order Priority Risk	Competition among major customers leads to changes in supply priorities	Extended Delivery Times
Technology Dependence Risk	Core production processes rely on specific suppliers	Technology Lock-In
Switching Cost Risk	Changing suppliers requires re-audit and adaptation	High Opportunity Cost

Downstream brands are showing a trend of

, with orders concentrating in top suppliers. While this brings economies of scale, it also means increasing reliance on core suppliers [2].

: Systemic vulnerability caused by lack of redundancy in the supply chain

:

1. High Production Concentration
   • Shenzhou International’s production capacity in China/Southeast Asia accounts for 70%/30%, with production bases concentrated in Ningbo, Vietnam, Cambodia, etc. [2]
   • Any issue with a single factory may affect overall supply

2. Lack of Alternatives
   • Uniqlo’s “Takumi (Artisan)” system is deeply embedded in the production processes of core suppliers [1]
   • Alternative suppliers cannot reach equivalent quality standards in the short term

3. Amplified Bullwhip Effect
   • Demand forecast deviations are amplified along the supply chain
   • Uniqlo uses the ECR (Efficient Consumer Response) system to mitigate this issue [1]

: Cost fluctuation risks caused by supply chain concentration

:

• Exchange Rate Risk
  : Procurement contracts denominated in foreign currencies face exchange rate fluctuations [3]
• Raw Material Price Volatility
  : Raw material prices of functional fabrics (such as Airism) affect supplier pricing
• Labor Cost Increases
  : Rising labor costs in China compress suppliers’ profit margins [4]
• Compliance Cost Increases
  : International brands have increasingly high requirements for suppliers’ social responsibility and environmental standards

: Challenges to quality management from rising supply chain concentration

:

1. Quality Consistency
   : Large-scale concentrated production increases the risk of quality fluctuations
2. Supervision Difficulty
   : After streamlining the number of suppliers, the supervision responsibility for individual suppliers becomes heavier
3. Innovation Pressure
   : Core suppliers undertake more R&D tasks, concentrating innovation failure risks

Uniqlo controls quality and production by dispatching “Takumi (Artisan)” teams to reside in factories for long-term guidance and establishing a TCM (Total Control Management) system [1].

---

The apparel industry as a whole shows a trend of supplier

:

Brand	Change in Number of Suppliers	Change in Share of Top Supplier
Nike (Footwear)	150 in 2013 → 124 in 2018	5% → 9%
Nike (Apparel)	430 in 2013 → 328 in 2018	6% → 13%
Adidas	340 in 2014 → 296 in 2017	Continuously rising

This trend reflects the industry’s emphasis on

, but it also increases concentration risks [2].

Facing supply chain risks, some enterprises have begun to implement the “China + 1” strategy, transferring part of their production capacity to countries such as Vietnam, Bangladesh, and Cambodia [4]. However:

• Tadashi Yanai’s View
  : Fast Retailing Chairman Tadashi Yanai clearly stated that “de-Chinaization is not feasible”, emphasizing that “to achieve high-quality and large-scale production, it still has to be Made in China” [4]
• Transfer Costs
  : A complete supply chain ecosystem cannot be replicated in the short term
• Quality Considerations
  : Chinese suppliers still have advantages in technical capabilities and quality control

---

• Moderately increase the proportion of Southeast Asian suppliers
• Cultivate emerging production bases such as India and Bangladesh
• Establish a supplier echelon system (core suppliers + alternative suppliers)

• Establish a real-time supply chain monitoring system
• Apply blockchain technology to enhance traceability
• Use AI for risk early warning

• Establish deeper strategic partnerships with core suppliers
• Jointly invest in key production capacity and R&D
• Share risk and benefit mechanisms

• Establish parallel production capacity in different geographical regions
• Establish strategic inventory buffers
• Develop supply chain disruption emergency plans

---

The risks brought by rising core supplier concentration for Uniqlo are multi-dimensional, mainly including:

1. Regional Concentration Risk
   : The high proportion of Chinese suppliers leads to over-reliance on a single region
2. Bargaining Power Risk
   : Reliance on core suppliers may weaken the procurement negotiating position
3. Supply Chain Vulnerability
   : Lack of redundancy amplifies single-point failure risks
4. Cost Fluctuation Risk
   : Exchange rate, labor, and raw material price fluctuations transmit pressure
5. Quality Control Risk
   : Challenges to quality consistency from large-scale concentrated production

Against the backdrop of supplier integration in the apparel industry, Uniqlo needs to

, and build a more resilient supply chain system through diversified layout, digital management, and deepening strategic cooperation.

---

[1] STEMM Press - “Advantages, Problems and Strategies of Uniqlo Supply Chain” (http://stemmpress.com/uploadfile/202404/b6472ddbc7ddc83.pdf)

[2] Guosheng Securities/Guoxin Securities Research Institute - Research Report on Shenzhou International (02313.HK) (http://pdf.dfcfw.com/pdf/H3_AP201908151344251219_1.pdf)

[3] Fast Retailing Co., Ltd. - Risk Factors (https://www.fastretailing.com/eng/ir/direction/risk.html)

[4] Nikkei Chinese/Sina Finance - Exclusive Interview with Tadashi Yanai, Chairman of Uniqlo’s Parent Company (https://zh.cn.nikkei.com/industry/management-strategy/57156-2024-12-02-08-30-48.html)