Why Smart Clothes is About Much More Than Just Tech Stocks

Guild Investment Management  |

Once upon a time, the textile industry was a major source of employment for U.S. workers. Many decades of outsourcing saw U.S. textile employment fall dramatically, from 5.2 percent of the workforce in 1950 to less than one percent today. This was a classic manifestation of lower-value-added manufacturing moving abroad, and it has helped develop economies from China and Vietnam to Bangladesh and Pakistan, while U.S. manufacturing employment has moved to higher-value-added products.

Wage and Salary Employment in U.S. Textile and Apparel Industries

Source: Bureau of Labor Statistics

Those U.S. textile manufacturers who have survived have done within their own industry what the U.S. economy has done as a whole over the past half-century – and indeed, what every economy does in a global system as it becomes wealthier and richer in manufacturing expertise. They have moved up the value chain, manufacturing more complex, specialized, and technically challenging products for more demanding applications. South Carolina, once a center of the U.S. textile industry, is still home to the privately-owned Inman Mills, founded more than a century ago. Over the last decade it has boosted employment by specializing in flame-resistant fabrics containing silica and fiberglass.

We read last week about a new initiative under the wing of the Massachusetts Institute of Technology which aims to integrate textile R&D efforts in the industry’s move into its own corner of the internet of things -- the emergence of so-called “smart textiles, “smart garments,” and “functional fabrics” at the intersection of engineering, information technology, and materials science. Smart garments will incorporate sensors and other electronic devices to allow them to sense and respond to their environment.

The initiative, “Advanced Functional Fabrics of America,” will help coordinate R&D efforts and funding for startups in a variety of ways -- maintaining scientific databases to collect relevant intellectual property in a single research facility; setting up prototyping facilities; helping optimize manufacturing processes; setting up regional incubators for start-ups; and creating educational and workforce training systems.

The project is linking government, universities, and corporations. Corporate partners in the project so far include Intel (INTC), Analog Devices (ADI), Nike (NKE), VF Corporation (VFC), Corning (GLW), DuPont (DD), and Medtronic (MDT).

That list of names should suggest some of the applications that “functional fabrics” will enable:

  • Battlefield gear for soldiers to enhance situational awareness; developers stress fabrics which could clearly alert soldiers to the presence of their own men and prevent deaths by “friendly fire”;
  • Clothing which can cool, change color, adjust size, mask odors, take photographs, or monitor and transmit medical information;
  • Similarly functional fabrics for use in home furnishings and medical contexts;
  • Consumer goods which can interact with other smart devices.

In short, smart fabrics represent the emergence of the textile industry as another high-tech industry, with renewed potential for innovative and transformational applications seen in other industries that have moved from low- to high-tech applications. Like other industries that have “died” and moved their manufacturing base overseas, only to rise again in more technically challenging form in developed countries, textiles could be revitalized as consumers begin to demand the new products and functions that smart textiles make possible. The supposed demise of U.S. manufacturing always neglects this transformation, which will be ongoing here as it is throughout the industrial ecosystem, as long as the economic, legal, and regulatory environment remains supportive.

Investment implications: Soon, the fabrics you wear and use in your home and workplace will start to be integrated into the internet of things -- providing additional functionality that consumers will eventually come to expect as normal. Clothes and furniture will sense their environment and adapt to it, and become integrated into the whole suite of smart tools used by the military, physicians, and consumers. A new initiative at the Massachusetts Institute of Technology aims to facilitate the development of the U.S. smart fabric infrastructure through databases, incubators, and workforce training. To us, this illustrates the continued resilience of U.S. high-value-added manufacturing, against the cynics and naysayers. As long as the economic, tax, and regulatory environment remains supportive, this kind of innovation will be a hallmark of U.S. industry.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
GLW Corning Incorporated 28.18 0.29 1.04 6,952,563 Trade
INTC Intel Corporation 46.78 -0.37 -0.78 19,786,270 Trade
ADI Analog Devices Inc. 108.63 0.04 0.04 2,761,428 Trade
VFC V.F. Corporation 81.01 0.00 0.00 1,194,482 Trade
NKE Nike Inc. 83.31 0.57 0.69 5,573,658 Trade
MDT Medtronic plc. 107.83 0.04 0.04 4,402,639 Trade

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