Malaysian glove makers need more than factory efficiency to close China gap

KUALA LUMPUR: Malaysian glove makers may no longer be able to close their cost gap with Chinese rivals simply by making their factories more efficient, as China's largest manufacturers tighten their grip on the supply chain.

Public Investment Bank Bhd (PublicInvest) said Chinese manufacturers' advantages increasingly extend beyond production efficiency to upstream procurement and supply chain integration.

It singled out Intco Medical, which is strengthening its control over the glove value chain, including by taking stakes in upstream nitrile latex producers.

The integration gives the Chinese manufacturer greater control over raw material costs and supply at a time when disruptions in the Middle East are adding to procurement risks.

"In our view, this makes it more challenging to narrow the structural cost gap through factory-level improvements alone," PublicInvest said in a note.

The research firm said Intco is increasingly emerging as the industry's benchmark for pricing and operational efficiency.

While recent increases in Chinese glove average selling prices (ASPs) have given Malaysian manufacturers room to raise prices, PublicInvest said their structural cost disadvantage continues to constrain their competitiveness.

"We see further market share erosion risks if domestic players continue to compete primarily on volume and price," it said.

The shift in competitive dynamics has already coincided with a sharp erosion of Malaysia's dominance in the global glove industry.

The country's share of global glove production fell to 36 per cent in 2025 from 54 per cent in 2018, while China's share nearly tripled to 23 per cent from eight per cent over the same period.

Malaysia's glove export value also fell 25 per cent to US$3.3 billion (RM13.52 billion) from US$4.4 billion (RM18.03 billion).

PublicInvest said the shrinking production share highlights the need for Malaysian manufacturers to strengthen their cost competitiveness and differentiate their products.

Malaysia's traditional advantage as a major natural rubber producer has also diminished as global demand shifted towards synthetic nitrile gloves.

The firm said greater reliance on nitrile has increased manufacturers' exposure to petrochemical feedstock costs and supply disruptions, making procurement efficiency and supply chain management increasingly important.

The industry's push towards higher-value specialty products could provide another avenue for Malaysian manufacturers, but PublicInvest cautioned that this alone may not be enough.

Cleanroom gloves traditionally command higher ASPs and margins than conventional nitrile gloves, although an influx of manufacturers into the segment could intensify competition and erode those premiums.

"The volume for specialty gloves has to increase substantially to contribute more meaningfully to their sales and earnings," it said.

PublicInvest said this limits its confidence that a shift towards specialty gloves alone can deliver sustained margin expansion.

Against this backdrop, the research firm downgraded the rubber glove sector to "Underweight" from "Neutral" following the recent share price rally, while keeping its earnings forecasts unchanged.

It downgraded Hartalega Holdings Bhd to "Underperform" with a target price of 98 sen and Kossan Rubber Industries Bhd to "Neutral" with a target price of RM1.36. Top Glove Corp Bhd remained at "Underperform" with a target price of 59 sen.