The architectural membrane market
High-performance fabrics and increasing demand
are driving new growth in fabric structures.
By Jason Kong and Xi Jiang
With the increasing construction of fabric structures, architectural membranes are gaining increasing prominence in China due to the combination of positive qualities such as heat insulation, sound insulation, light weight for easy transportation, hydrophobic properties that allow rain to create a self-cleaning effect, and the semi-transparency that allows UV rays from sunlight to create an automatic bleaching effect.
With increasing income levels in China, booming demands for leisure and travel will increase the demand for fabric structures. The majority of current fabric structure projects that use membrane materials are public investment projects such as stadiums and airports and do not generate much profit directly; the growth in this sector is mainly supported by the government’s public infrastructure strategies and is subject to high volatility from policy changes. However, GCiS China Strategic Research believes that’s not likely to be a major concern for the industry’s development in the near future because China is still investing heavily into its second-tier cities.
Although fabric structures have existed for thousands of years, modern architectural membranes are a relatively new type of building material that have been around just for a few decades and only started gaining prominence in China in recent years, around the time of the 2008 Olympic Games in Beijing.
One iconic membrane structure in China is the Water Cube, which is made of the membrane ETFE (ethylene tetrafluoroethylene). Two other key membrane materials widely used in China are PVC (polyvinyl chloride) and PTFE (polytetrafluoroethylene).
With the exception of ETFE, membranes derive flexibility from the fabric underneath (such as polyester or fiberglass), while the plastic is what gives these fabrics the additional protection needed to stand up against natural weathering. (ETFE can be directly shaped into sheets.)
In terms of the differences between products, PVC is a type of synthetic thermoplastic coated on polyester fiber and is one of the cheapest membrane products. PTFE is a plastic with strong carbon-fluorine bonds usually coated on fiberglass material to give improved properties and durability. ETFE is a fluorine-based plastic and is considered the highest quality product among architectural membranes. It has the best durability and resistance against natural weathering, but it is also the most expensive.
There are two main types of membrane structures: tensile structures that are shaped through tension, compression or bending; and pneumatic structures that are supported by internal pressurized air.
Demand and development
The largest difference in revenue streams between the different city tiers can be seen in the PVC product segment, where second-tier cities dominate more than half of the total PVC product revenue. This is likely due to a combination of the lack of demand for expensive high-quality products in second-tier cities and the lack of large-scale iconic projects in first-tier cities. Because second-tier cities are not as wealthy, the budget of iconic city projects is not likely to be as high as the ones found in first-tier cities. This may cause some end users to opt for the cheaper PVC, which can be as much as 10 times less expensive than PTFE membranes. Additionally, many large-scale iconic membrane structures have already been developed in first-tier cities, and what remains are smaller-scale projects that do not require large quantities of architectural membrane, further restricting the revenue from these cities.
Regarding the overall difference in revenue between first- and second-tier cities, the most obvious explanation is that there are four first-tier cities (Beijing, Shanghai, Guangzhou and Shenzhen) and 19 second-tier cities across China, meaning that there are simply many more projects in second-tier cities with a much greater demand for architectural membranes. This difference is likely to become larger in the future as second-tier cities become more developed.
For third-tier cities, development is still in the early stages, and the use of architectural membranes in the variety of structures across the different application sectors has yet to begin. The use of higher-end ETFE membrane has yet to penetrate to cities at this level.
Quality and competition
The ETFE and PTFE product segments are expected to grow most quickly as developers in China demand stable high-quality products. However, given that architectural membrane has only been in the country for a relatively short period, domestic suppliers need to catch up in terms of technology to be able to compete with foreign firms in the high-end markets with the highest profit margins.
The difference in product quality results in much higher prices being charged by foreign suppliers, allowing them to gain significant revenue market share with limited output. Domestic suppliers are expected to have the advantage in the long run, however, because they can enjoy the benefits of producing locally while most foreign suppliers still import their products into China. This phenomenon is due in large part to foreign suppliers’ fear of losing their technical advantage as a result of technological piracy, given that China has a reputation for its ability to replicate foreign technology at a low cost. The unstable quality products from domestic suppliers, coupled with the high prices of foreign products, have been major inhibitors to the industry’s growth.
Sports and transportation structure applications are two of the biggest market segments for architectural membranes in China. They are also expected to have the highest potential growth in the near future. Scenic structures are also expected to have high growth as a result of the improving living standards in China.
The cultural segment is not much smaller than scenic structure applications, but it is expected to have a relatively slower growth in the near future; these structures appeal to a smaller portion of the population, and this market segment is already quite developed. Commercial and industrial structure applications are expected to have one of the slowest growth rates due to many substitute products that are deemed more appealing.
Overall, the architectural membrane industry is forecasted to grow at a CAGR of approximately 10 percent for the next five years as China’s economy continues to grow.
As the government continues to invest heavily in sports structures and expand the country’s transportation network, the demand for fabric structures in China is growing rapidly.
Through the last few years of rapid development, the use of architectural membranes is becoming saturated in first-tier cities and demand is already shifting towards second-tier cities where many more new projects are being undertaken. Given the potential future applications of fabric structures and the improvements in fabric technology combined with the government’s incentives for a greener country, the prospects for architectural membranes in China are looking very positive.
Jason Kong and Xi Jiang are senior analysts with the firm of GCiS China Strategic Research, headquartered in Beijing, China.
About GCiS China Strategic Research
GCiS is a China-based market research and advisory firm focused on business-to-business markets. Since 1997, the company has been working with leading multinationals in sectors including industrial products, chemicals, resources, building and construction, among others. This article is based on a recent research report that GCiS published on China’s Architectural Membrane market in 2014.
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