In recent years, Cambodia's garment industry has faced significant pressure. Rising labor costs, increasingly stringent environmental standards, and rapid technological changes have created challenges for factories striving to maintain competitiveness. For those looking to invest in Cambodia, these pressures also present potential opportunities. This article explores how automation and smart technology can help Cambodian factories navigate this period of change and seize new opportunities.
Current Challenges in Cambodia’s Garment Industry
The Cambodian garment industry has long relied on labor-intensive production and serves as a key pillar of the country's economy, providing jobs for hundreds of thousands of people. However, with rising labor costs, this model is facing growing challenges. Meanwhile, neighboring countries like Vietnam and China are shifting toward high-value industries, such as electronics and semiconductors, and increasing their use of automation technology, placing Cambodia at a disadvantage in the global wave of automation. Although Cambodia enjoys political stability and a favorable geographic location, these factors alone are no longer sufficient to cope with the intensifying competition in global markets.
Against this backdrop, manufacturers in Cambodia are being forced to rethink how they can enhance production efficiency through technological transformation and automation to remain competitive. This shift is essential for the garment industry to address regional and global competition and meet the increasingly diverse demands of global markets.
Competing in the Region: Cambodia’s Challenges and Opportunities
While Cambodia has a unique position in the Southeast Asian garment manufacturing market, it faces strong competition from several neighboring countries:
1. Vietnam is transitioning its manufacturing sector toward higher-value industries, such as electronics and semiconductors. The rise of these high-tech industries has strengthened Vietnam’s global competitiveness, while the contribution of its garment industry to the economy is gradually decreasing.
2. China remains a global manufacturing leader, thanks to its vast supply chain networks and advanced automation technologies. However, as labor costs rise, China is moving away from labor-intensive industries to capital- and technology-intensive sectors such as automotive, electronics, and aerospace. Though its garment industry remains substantial, it is increasingly focused on smart, large-scale production to maintain its global leadership.
3. Malaysia is shifting its economic focus toward high-tech, high-value manufacturing, particularly in electronics and machinery. The garment sector plays a relatively minor role in its economy.
4. Singapore has high labor costs but focuses primarily on finance and services, with garment manufacturing not being a key industry.
5. Indonesia is working to expand its manufacturing base, particularly in furniture, automotive, and handicrafts, aiming to enhance its global competitiveness through industrial diversification.
Despite these challenges, Cambodia’s textile and garment sector remains a cornerstone of its economy, supporting the livelihoods of approximately 700,000 workers and accounting for a significant share of the country’s export revenue. In 2023, the industry’s exports totaled $11.1 billion, though this was a decline due to weaker global demand and domestic policy changes. These figures indicate that Cambodia’s garment industry must undergo technological transformation to effectively face external challenges.
Technological Upgrades: Cambodia’s Path Forward
To modernize its economy and strengthen the international competitiveness of its industries, the Cambodian government launched the “Cambodia Industrial Development Policy 2015–2025.” This policy focuses on introducing new technologies, workforce skills training, and upgrading the country’s industrial structure to maintain a competitive edge in the face of global automation trends. However, the development of automation and smart technologies in Cambodia also presents a series of challenges. While AI, automated production lines, and the Internet of Things (IoT) offer the potential for enhanced production efficiency, the high cost of technology investment can be a financial burden for many small and medium-sized factories. Additionally, the relatively low skill level of Cambodia’s labor force requires companies to invest more resources in employee training to adopt these new technologies.
Supply Chain Resilience: Addressing Global Crisis Challenges
The disruptions in global supply chains in recent years have highlighted the urgent need for emerging markets like Cambodia to strengthen their resilience and adaptability. To prevent future supply chain crises, Cambodia must diversify its supply chains, improve logistics efficiency, and strengthen regional trade partnerships. The COVID-19 pandemic severely impacted global manufacturing, while geopolitical tensions and trade conflicts further emphasized the need to reevaluate existing trade routes and alliances. Additionally, the increasing frequency and severity of climate-related natural disasters threaten the stability of infrastructure and transportation systems. Overreliance on a few major economic powers places Cambodia’s economic structure at risk, and these external factors could weaken the stability of its supply chain.
Independent institutions have suggested that Cambodia explore strategic partnerships with India to diversify its geopolitical and economic alliances, reducing its dependence on China and Western countries. These recommendations aim to help Cambodia identify alternative partnerships and investment sources, thereby mitigating geopolitical risks and enhancing the country’s autonomy in the global market.
Future Outlook: Sustainable Development and Technological Innovation
Cambodia’s economic development path demonstrates a long-term commitment to sustainable development, particularly in reducing its reliance on traditional garment exports and promoting economic diversification. While this transition is essential for enhancing economic resilience, it also presents significant challenges, particularly for workers and business owners who depend on the garment industry for their livelihoods. Balancing the need for change with the protection of existing jobs will be a key challenge for both the Cambodian government and businesses in the future.
The garment industry is increasingly moving toward environmental sustainability and technological innovation, with market changes accelerating. The adoption of smart manufacturing technologies has become an inevitable trend for the future development of enterprises. This will not only help companies maintain international competitiveness but also strengthen the resilience of Cambodia’s manufacturing sector, ensuring long-term stability and growth.
For garment manufacturers looking to improve operational efficiency and modernize their production, the application of smart manufacturing is essential. At OSHIMA, we have years of experience in manufacturing equipment and understand the challenges our clients face in the production process. As a result, we have continuously upgraded our equipment to meet market needs, and several clients have already chosen these upgrades, gradually moving toward automation. If you are interested in enhancing production efficiency or learning more about smart manufacturing solutions, please contact us. We are committed to providing the best support to help your business remain competitive.