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DECEMBER9,2016

DEBORAHWEINSWIG,MANAGINGDIRECTOR,FUNGGLOBALRETAIL&TECHNOLOGYDEBORAHWEINSWIG@FUNG1937.COMUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2016TheFungGroup.Allrightsreserved.

Innovations in Fabric Materials

KEYTAKEAWAYSIn this report, which continues our coverage on innovations in fabricmaterials,wefocusonbio-basedsynthetic fibersandsyntheticspidersilk.Welookatthecompaniesdevelopingproductsinthesecategoriesandthepotentialapplicationsoftheseinnovations.

1) LenzingAGestimatesglobalfiberconsumptionat95.6milliontonsin2015.Petroleum-basedsyntheticfiberscomprisethelargestshareat62.1%, however, leave a significant carbon footprint during theproductionprocess.

2) Bio-basedsynthetics,ontheotherhand,aremadefromrenewableresources which offer a lower carbon footprint alternative toconventionalsynthetics,aswellassatisfythegrowingtrendformoresustainableproducts.

3) Spider silk possesses extraordinary mechanical properties. Someinnovative companies have successfully mimicked this wondermaterial. Synthetic spider silk has already seen potential use inmilitaryandoutdoorperformanceapparel.

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DECEMBER9,2016

DEBORAHWEINSWIG,MANAGINGDIRECTOR,FUNGGLOBALRETAIL&TECHNOLOGYDEBORAHWEINSWIG@FUNG1937.COMUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2016TheFungGroup.Allrightsreserved.

ONGOINGINNOVATIONSINFABRICMATERIALSFabrics are typically made of natural or man-made fibers. Global fiberconsumptiongloballywasestimatedat95.6milliontonsin2015,accordingtoLenzingAG.Syntheticfibers–themajorityofwhicharepolyesterfibers– comprise the largest share at 62.1%, followed by cotton with a 25.2%share, according to a report by Lenzing AG, a leading manufacturer ofsyntheticfiber.

Figure1.GlobalFiberConsumptionin2015

Source:LenzingAG

Thefabricmateriallandscapehasbeentransformedoverthepastcoupleofdecadeswithongoinginnovationsinneworenhancedfabricmaterials.

One of the key innovations in fabric materials in the 20th century waspolyester.Sincethen,polyesterfabrichasgraduallyproliferatedthetextileindustry. Itovertookcottonas themost-produced fabricmaterial in2002,with20.8milliontonsmanufacturedworldwide.Polyesterfiberproductionhascontinuedtogrow,morethandoublingtoreachanestimated48milliontonsin2015.By2025, it isexpectedtoreach90.5milliontons,afour-foldincreasefrom2002.

Figure2.GlobalProductionofCotton,PolyesterandWoolFiber

Source:TecnonOrbichem

90.5

28.1

0.70

25

50

75

100

1980 1995 2010 2025

MillionTonsPolyester

Cotton

Wool

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DECEMBER9,2016

DEBORAHWEINSWIG,MANAGINGDIRECTOR,FUNGGLOBALRETAIL&TECHNOLOGYDEBORAHWEINSWIG@FUNG1937.COMUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2016TheFungGroup.Allrightsreserved.

Many other innovations in fabric materials have emerged over the pastcouple of decades as well, from heat insulating to water-proof fabrics,creatingnewpossibilitiesinappareldesignandproduction.

Inthisreport,welookbio-basedsyntheticsandsyntheticspidersilk.

BIO-BASEDSYNTHETICSThe main difference between bio-based synthetics and conventionalsyntheticsliesintherawmaterialsused.Bio-basedsynthetics,asthenamesuggests,aremadefrombio-basedrawmaterialssuchassugarcane,cornsugars and agricultural waste. Conventional synthetics such as polyester,nylon and acrylic use raw materials derived from fossil fuels such aspetroleum,naturalgasandcoal.

Bio-basedPolyester:VirentVirent,aUSbio-basedchemicalcompany,showcasedtheworld’sfirst100%bio-based polyester shirt this year at the Textile Exchange SustainabilityConference. Bio-based polyester’s performance is similar to regularpolyester,anditcanbeprocessedusingthesameequipment,accordingtoRalphLerner,thecompany’sbusinessdevelopmentdirector.

The production process begins with Virent’s BioFormPX paraxylene, acompound produced from plant sugars that resembles the chemicalcomponentsofpetroleum.Thebio-basedparaxyleneisthenconvertedintobio-polyesterfabric.VirentworkswithFarEasternNewCentury (FENC),aleadingTaiwanesepolyestermanufacturer.Todate,theyhaveyettoentermassproduction.

Source:Stylourbano

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DECEMBER9,2016

DEBORAHWEINSWIG,MANAGINGDIRECTOR,FUNGGLOBALRETAIL&TECHNOLOGYDEBORAHWEINSWIG@FUNG1937.COMUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2016TheFungGroup.Allrightsreserved.

SYNTHETICSPIDERSILKSpider silk is regardedasoneof nature’swondermaterials becauseof itsextraordinary mechanical properties. It is tougher than Kevlar – a high-strength synthetic fiber used in racing tires and body armor – and has acomparabletensilestrengthtohigh-gradealloysteel,butismuchlighter.

Figure4.PhysicalPropertiesofSpiderSilk,KevlarandSteel

Material MaterialToughness TensileStrength Weight

SpiderSilk 120,000–160,000J/kg 1,100–2,900MPa 1.18–1.36g/cm3

Kevlar 30,000–50,000J/kg 2,600–4,100MPa 1.44g/cm3

Steel 2,000–6,000J/kg 300–2,000MPa 7.84g/cm3

Source:KraigBiocraft

The first reference to the use of spider silk dates back to the early 18thcentury inFrance,whereattemptsweremadetouse it tomakestockingsandgloves.Massproductionforcommercialapplications,however,wasanobstacle for centuries. Spiders are cannibals and tend to eat each otherwhen enclosed in a small area, making it impossible to farm them likesilkworms.Thishasmadespidersilktheobjectofresearchformanyyears,withsignificantresearchpapersdatingbackasearlyasthe1960s.

Variousattemptshavebeenmadetoproducespidersilk.Onesuchattemptwasmadein2009.Ittookonemilliongoldenorbspiderstoproduce80feetofsilk,orputanotherway,ittook14,000spiderstospinoneounceofsilk.

Anotherattemptusedgeneticallymodifiedgoatstoproducemilkcontainingprotein similar to that of the golden orb spider. However, it was notsuccessful, as thequalityof the silkproducedwas farbelow thequalityofnaturalspidersilk.

Sincethen,severalcompanieshavebeenracingtocommercializespidersilkfiber, also using techniques based on genetic engineering, but with adifferentapproach.Wediscussthreeofthese–KraigBiocraft,BoltThreadsandSpiberInc.

KraigBiocraft–TransgenicSilkwormsThis Michigan-based company has inserted modified spider genes intosilkworms to produce spider silk. Unlike spiders, silkworms can bedomesticatedandhavebeenusedtomassproducesilkfiberforcenturies.Thisallowsthecompanytoproducealargeamountofspidersilkefficientlyandcosteffectively.

KraigBiocrafthascreatedapproximately20differentgeneticallyengineeredspidersilkfibersbasedongeneticdesigns.DragonSilkisthecompany’sleadproduct,withaveryhightensilestrengthandelasticity,makingitoneofthetoughest fibers and an ideal material for many applications, according tocompanyCOOJonRice.

Its synthetic spider silk has already seen potential application in militaryapparel–thecompanyreceivedacontractofclosetoUS$1millionfromthe

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DECEMBER9,2016

DEBORAHWEINSWIG,MANAGINGDIRECTOR,FUNGGLOBALRETAIL&TECHNOLOGYDEBORAHWEINSWIG@FUNG1937.COMUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2016TheFungGroup.Allrightsreserved.

US military in July this year. Kraig Biocraft will deliver Dragon Silk-basedballistic shootpacks forperformance testing.Thearmed forceshavebeenrelyingonnylonforitsstrength,butnylonisdangerousforsoldiersbecauseat high temperatures it melts rather than burns, according to SteveArcidiacono, a microbiologist at the US Army’s Natick Solider SystemsCenter.

Source:KraigBiocraft

BoltThreadsandSpiberInc.–TransgenicMicroorganismsThese two startups take a different approach to producing spider silk.Insteadofmodifyingthegenesofsilkwormstoproducethematerial, theyhave harnessed genetically engineered microorganisms to produce theproteinthroughfermentation,whichservesastherawmaterialtomakethesyntheticspidersilk.Themaindifferencebetweenthetwostartupsisinthemicroorganisms they use – Bolt Threads uses genetically modified yeast,whileSpiberusesgeneticallymodifiedE.colibacteria.

BoltThreadsBoltThreads isaCalifornia-basedstartupfounded in2009withtheaimofproducing affordable synthetic spider silk. The startup claims to have alower rawmaterial cost by using significantly less expensive yeast ratherthanE.coli,accordingtoSueLevin,itschiefmarketingofficer.BoltThreadsexpects to produce the spider silk yarn at a price of US$100 per kg,comparableandcompetitivewithhigh-endnaturalfiberssuchascashmere,silkandmohairatasimilarpricerange.

InMay2016,BoltThreadsannouncedapartnershipwithoutdoorclothingcompanyPatagonia to further develop the fabric, andhas already startedproducingthesyntheticspidersilkinlargescale.

SpiberInc.SpiberInc.isaJapan-basedstartupfoundedin2007thataimstodrasticallylowertheproductioncostofspidersilktomakeitpracticalforcommercialuse.Althoughtheabsoluteproductioncosthasnotbeendisclosed,Spiberclaimsthatproductivityhasincreasedby4,500times,anditsmanufacturingcost is only 1/53,000 when compared with eight years ago, when thestartupfirstbegantoresearchthefermentationprocess.

InSeptember2015,thestartupcollaboratedwithTheNorthFacetocreatetheworld’sfirstouterwearjacketmadewithsyntheticspidersilk,theMoonParkawhich retails at US$1,000. The jacket is based on The North Face'sAntarctica Parka, which uses conventional material and is sold at $736,aboutonethirdcheaperthanMoonParka.

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DECEMBER9,2016

DEBORAHWEINSWIG,MANAGINGDIRECTOR,FUNGGLOBALRETAIL&TECHNOLOGYDEBORAHWEINSWIG@FUNG1937.COMUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2016TheFungGroup.Allrightsreserved.

Source:Spiber

IMPLICATIONSFORTHEAPPARELINDUSTRY

GrowingTrendinFiberInnovationSyntheticfibers,aninnovationfromthepastcentury,accountforoverhalfof global fiber consumption. However, as synthetics are produced frompetroleum-basedmaterial, the finite supply of petroleummeans that theproductioncostofsyntheticfabricscouldbesubjecttomarketvolatility.

More importantly, petroleum-based products leave a significant carbonfootprint during the production process. They are also not biodegradableandcausesignificantdamagetotheenvironment.Tinyfibersfromsyntheticfabrics also have the potential to poison the food chain. According to astudybytheUniversityofNewSouthWales in2011,microfibersmadeup85%ofman-madedebrisfoundonshorelinesaroundtheworld.

Consumers have become increasingly aware of a product’s sustainability,andthisisespeciallytrueamongmillennials.AscoveredinourGlobalRetailTrends for 2016 report,millennials place a higherweighting on corporateresponsibilityandsustainabilityintheirpurchasingdecisionsthandoothergenerations.

Syntheticfabricsubstitutes includebio-basedsyntheticsandprotein-basedspider silk, which are based on renewable resources such as plants andmicroorganisms. Water- and stain-resistant cotton fabrics also help topromotesustainability,astheycanreducethewaterandenergyusedinthewashingprocess.

ManagingtheCostBarriersNew innovations involve investment in R&D, and, inmost cases, a highermanufacturing cost. For example, the production cost of synthetic spidersilkis$100/kgwhilethethresholdpriceformassadoptionisUS$20-30/kg,according to estimated figures from Spiber. Even though consumers arewillingtopayapremiumforsustainableofferings,itisimportanttostrikeabalance between price premium and affordability and many fiberinnovationsarenotrelevantforthemassapparelmarketjustyet.

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DECEMBER9,2016

DEBORAHWEINSWIG,MANAGINGDIRECTOR,FUNGGLOBALRETAIL&TECHNOLOGYDEBORAHWEINSWIG@FUNG1937.COMUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2016TheFungGroup.Allrightsreserved.

DeborahWeinswig,CPAManagingDirectorFungGlobalRetail&TechnologyNewYork:917.655.6790HongKong:852.6119.1779China:86.186.1420.3016deborahweinswig@fung1937.comEddieWongSeniorResearchAssociate

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