PPE industry: India’s moment in the sun?

India has emerged the second largest PPE manufacturer in the world, but can it also evolve into a major export hub? India Business & Trade analyses the growth prospects and challenges for India’s budding PPE industry, as it prepares for the COVID-hit global market.

• Post-COVID, there has emerged a severe drought of PPE kits due to diverse factors including rising demand, panic buying, hoarding and misuse; compelling the WHO to ask governments to increase PPE manufacturing by around 40%.
• The global personal protective equipment market was valued at US$ 50 billion in 2016, and is projected to reach US$ 58-60 billion in 2020 itself, particularly due to the surge in demand post-pandemic.
• Compelled by the rising demand at home, Indian government and apparel industry have worked tirelessly to build a viable PPE manufacturing ecosystem from ground up in just two months. In fact, India has become the world’s second largest PPE manufacturer by volumes.
• The government’s decision to progressively open up the sector to exports opens up exciting opportunities. While initial entry could be difficult due to high standards by countries like US and Europe, the present supply shortage provides India with a vital opportunity to penetrate a lucrative and stable market.

Crisis situations are known to often bring about the best in people. Amidst the terrible human tragedy that has unfolded over the past few months, we have also been witness to numerous tales of human triumph – frontline healthcare workers fighting the pandemic; students  and professors at leading technology institutes coming up with brilliant innovations; kirana stores serving our vital needs amidst the unprecedented lockdown or pharma players ensuring delivery of essential drugs despite severe supply chain disruptions.

One such phenomenal success story that is unfolding before our eyes is that of a budding PPE industry in India. As of February 2020, India was an importer of PPE kits, and had no manufacturing capability. When COVID-19 struck, India was only able to import around 52,000 kits for its frontline healthcare workers due to a supply crisis.

In a highly supplier driven market, concerns on quality also cropped up. Globally, there was a severe drought of equipment due to diverse factors including rising demand, panic buying, hoarding and misuse; compelling the WHO to ask governments to increase PPE manufacturing by around 40% .

The government and the apparel industry, embarked on an all round effort to build indigenous capability. Industry bodies like Apparel Export Promotion Council (AEPC), Indian Technical Textiles Association and Tirupur Exporters Association were involved, and DRDO also did some extensive testing.

As a result, a virtually non-existent industry has suddenly cropped up in a span of a few months. India is not just the world’s second largest manufacturer of PPE kits now, but has also developed the world’s first reusable PPE suit. Developed by Vadodara-based company Sure Safety, this kit uses the Positive Air Supply System technology, which is also used by developed countries in areas of high level infections like isolation wards or ICUs. Dr A. Sakthivel, Chairman, AEPC, affirms:

“In the past two months, market dynamics have completely changed and PPE products emerged as a boon for the apparel industry of India. Now, most of the apparel manufacturers are developing their capacity to manufacture PPEs. Production of PPE has grown from 0 to 8 lakh pcs per day in 3 months.”

Source: WTO Secretariat, figures for 2019

For a number of apparel companies around the world, the PPE shortage has been a blessing on two fronts. High street chains cancelled millions of garment orders that would have been serviced by factories in South and Southeast Asia, thereby leaving them with humungous spare capacity of both man and machine. Subsequently, a few prominently high end brands like Barbour, LVMH  Moët Hennessy, Louis Vuitton, and Chanel shifted their supply chains to PPE.

Chinese PPE exports declined by around 15% during January-February 2020, as it was fighing the panemic on its home turf. Meanwhile, Sri Lanka gained PPE supply orders upward of US$ 500 million during the crisis and Malaysia witnessed a huge surge in exports of rubber gloves, accounting for around 65% share in the category.

A report by Frost & Sullivan observes that “the current Global COVID-19 outbreak has created an unprecedented demand for healthcare PPE products such as face masks, gloves, coveralls, gowns, goggles, and face shields”. According to its demand growth index estimates for various categories, face masks (200), gloves (200) clothing (225) and goggles/face shields (275) are all expected to experience substantial growth by 2021-22 (all figures assume 2019 as base year with value at 100).

Companies like 3M, Ansell, DuPont, Honeywell Safety Products, Kimberly-Clarke Corporation, Lakeland, MoldexMetric, etc are trying their best to rise to the occasion. But for US and European countries, ramping up on supply is not easy, as  60-70% of their production is outsourced to Asian nations, particularly China. From the perspective of apparel makers, demand from healthcare, EMS and Lab workers during transportation, care, and testing of COVID patients is huge, and may remain at high levels even after the pandemic ends.

The report further stresses on how this disruption could mean a more long term transformation in market dynamics. Governments and healthcare industry are likely to boost strategic stockpile of critical PPE supplies multifold, to ensure they are better prepared for similar situations in the future. This is expected to ensure steady demand in the next 18-24 months.

Governments are also expected to enhance indigenous manufacturing capacities to cut down dependence on imports. On the other hand, the Indian government has opened up the market for exports with an initial quota of 50 lakh, showing confidence in the industry’s ability to fulfil domestic demand. But for a sector that has just sprung up in the very recent past in response to a crisis, it is worth analysing if exports will prove to be as fruitful given the well entrenched competition.

Process easy, standards tough

Primarily there are four products used in the healthcare industry under PPE – disposable gloves, disposable masks (surgical and N-95s), disposable face shields and gowns & coveralls. Around 70-80% of the gloves are made in Malaysia, which make it a complicated category. If you have the machine and equipment, both surgical and N-95 masks can be manufactured as they are fairly automated processes. Even face shields are fairly simple products, so it should not be an issue. Gowns are of two types – surgical and isolation – the former is tougher in terms of standards as compared to the latter. But as Sanjiv Bhaskar, Vice President, Research – Chemicals, Materials & Nutrition, Frost & Sullivan, informs, production of coveralls is a little labour intensive, so India is well placed to manufacture them.

The wide consensus is that PPE manufacturing (referring to coveralls and gowns) as a process requires little adjustment for apparel manufactuers and entry barriers are quite low. Vijay Agarwal, MD, Creative Exports, adds that for an apparel manufacturer, pivoting to PPE manufacturing is not very difficult:

“Normal woven garments have a stitching element, while non-woven garments are basically sealed by heat. So it needs a different type of machine as you have to apply tapes on it. In the medical industry. They do not want any seam to be seen – so these seams are sealed by heat. Since we use stitching, the seams are not so opaque.”

Quality of Indian PPE so far has been variable, but international agencies need a high standard material. Criteria that need to be fulfilled for the raw material pertain to things like resistance to water penetration, surface water repellency, breaking strength, elongation at break, electrostatic decay, resistance against penetration by synthetic blood and filtration efficiency.  As per our interactions with suppliers, buyers also generally ask for material that is lighter, comfortable and easy to wear.

Dr Sakthivel affirms that the major constraints are supplies of the inputs like fabric, tapes and other accessories and the machines for steam sealing. Both these are currently imported.

An opportunity in crisis

Despite having the PPE market at arm’s length, Indian companies have been reluctant to make a push into the market for various reasons. A key reason, according to industry insiders was that apparel makers did not have the machines for it. Also, this was part of the non-woven segment, and they were already witnessing significant growth in woven garments that kept them preoccupied. PPE just wasn’t ‘attractive enough’ till recently.

The fact that the ecosystem has come up in such a short span is definitely a positive. In terms of machinery and raw material, Indian companies may not face much issues, but they will have to be wary of providing sub-standard or inconsistent quality. With the surge in demand, the counterfeiting industry is also extremely active. Vijay Agarwal exercises cautious optimism on the surge in orders in the international market, stating:

“Right now the major ecosystem support we need is for international laboratories to give their support to Indian laboratories. Otherwise sending pieces, waiting for 4-5 weeks to get them passed and if there is an issue, then sending again is a big problem. So we are telling the government to enable this. That is not going to happen tomorrow. Even for fabrics and garments, we never used to have international laboratories earlier, and now we do.”

The surge in demand and the thrust to derisk from China provides India with a major opportunity to make a strong thrust in this segment. Moreover, there has been some relaxation on FDA standards under Emergency Use Authorisation for surgical gowns and gloves, which could facilitate entry for players at this stage.

It is an invaluable opportunity also because the PPE market is expected to open up further in the non-medical segment. Even post-COVID, players insist that PPE could continue to be relevant in sectors such as airlines and restaurants. It could be lighter, woven and also reusable for non-medical sectors, with significantly less standard compliance needed. Sanjeev Bhaskar adds:

“Globally the market for PPE is in the region of about US$ 50 billion. In 2020, the market for PPE in is expected to be around in the region of US$ 58–60 billion. Apart from this, workwear offers an additional opportunity of US$ 10-12 billion.”

A counter argument is that apparel manufacturers would mostly like to move back to garment production in a big way once demand returns in that sector. But as and when COVID recedes into memory, the PPE market could sustain over a longer period as governments and medical sector will seek to build surplus capacities in anticipation of future threats.

Non-medical sector is also expected to see stable demand going forward, and it is not fashion-sensitive either. So now that an ecosystem has been created and it has demand side support, it’s time for India to throw their hat into the ring and make the best of it through a well-planned and strategic approach.