Facing Overcapacity: Exploring Joint-Operation Factories in China’s Ceramic Tile Industry
The Chinese ceramic industry is facing significant challenges as overcapacity continues to weigh heavily on the market. According to statistics from the China Building and Sanitary Ceramics Association, the total ceramic tile production in 2024 reached 5.91 billion square meters, representing a 12.18% decline from 2023. By the end of 2024, the number of architectural ceramic production lines across the country had dropped to 2,193, compared to 2,485 in 2022, representing an exit rate of 11.75%.
With production capacity far outstripping demand, the industry’s production-to-sales ratio stands at an estimated 48%, leaving 52% of capacity unused. This imbalance has prompted many ceramic enterprises to rethink their strategies, with some shifting away from building their factories and investing in production lines. Instead, they are turning to joint-operation factory models, seeking opportunities for collaboration with suitable partners. But does this approach truly open the door to “strong partnerships,” or is it simply another experiment in the evolving market landscape?
The Rise of Joint-Operation Factories
The concept of a joint-operation factory has gained traction as ceramic enterprises look to adapt to the current market conditions. Unlike traditional factory ownership, this model emphasizes resource-sharing partnerships between enterprises. A spokesperson for a prominent ceramic company recently revealed their plans to adopt this model, describing it as a key pillar of their operations in 2025.
Key Features of the Joint-Operation Model
- Selective Collaboration: Companies are focusing on partnering with factories that meet specific criteria. For example, the spokesperson mentioned two requirements:
- The factory’s production scale should be valued at approximately 1 billion RMB.
- The factory must be willing to share resources such as R&D, production capabilities, and quality control systems.
- Resource Efficiency: Unlike traditional investments in new production lines or kilns, joint-operation factories allow enterprises to avoid unnecessary capital expenditures. Instead, they can rely on shared resources to develop products according to their standards.
- Deep Collaboration: The joint-operation model involves more than just outsourcing production. It requires extensive cooperation in product design, R&D, technical processes, and quality control, fostering a partnership that goes beyond typical OEM or private-label arrangements.
Advantages and Challenges of Joint-Operation Factories
Advantages
| Aspect | Benefits |
|---|---|
| Cost Management | Avoids the high costs of building new production lines, which can easily exceed several billion RMB. |
| Optimized Cash Flow | Maintaining healthy cash flow is easier when funds are not tied up in long-term factory investments. |
| Sustainability | Helps revive idle factories, preventing the waste of resources and reducing environmental impact. |
| Operational Flexibility | Allows companies to scale production up or down based on market demand without large fixed costs. |
Challenges
| Aspect | Challenges |
|---|---|
| Quality Control | Ensuring consistent product quality across different joint-operation factories can be complex. |
| Partner Compatibility | Selecting the right partner requires a thorough evaluation of their capabilities and standards. |
| Coordination Effort | Deep collaboration requires significant time and effort to align production processes and goals. |
| Reputation Risk | Poor-quality products from a partner factory can damage a brand’s reputation and market position. |
Shifts in the Industry: The Rise of Leading Players
While smaller factories struggle with overcapacity and declining demand, leading ceramic enterprises continue to grow. Data from two publicly listed ceramic companies illustrates this trend:
Ceramic Tile Production Volumes (2019–2024)
| Year | Company A (Billion m²) | Company B (Billion m²) |
|---|---|---|
| 2024 | 1.28 | 1.11 |
| 2023 | 1.31 | 1.49 |
| 2022 | 1.08 | 1.44 |
| 2021 | 1.19 | 1.61 |
| 2020 | 1.18 | 1.14 |
| 2019 | 0.75 | 0.78 |
Conclusion: Adapting to Change
The ceramic industry is undergoing significant transformation, driven by overcapacity, declining demand, and rising operational costs. In this evolving landscape, joint-operation factories represent a promising alternative to traditional production models. By fostering deep collaboration and resource-sharing, this approach has the potential to create “win-win” partnerships that benefit both parties.
However, success in this model depends on careful partner selection, robust quality control, and effective coordination. As the industry moves forward, ceramic enterprises must remain flexible and innovative, adapting their strategies to meet the challenges of a rapidly changing market. Whether through joint-operation factories, OEM agreements, or other innovative models, the ability to evolve will determine which companies thrive in the years to come.