> on-demand can never compete with mass production even if a big part of the mass produced stuff is discarded.

This is definitely not universally true. E.g. photos are very cheaply printed on demand. Even on-demand books are printed at reasonable prices. Sure, mass production is cheaper (both for books and pictures), but the value difference of the individual product is high enough to bridge the price gap.

For cloth this area has found little exploration. TFA covers production at niche scale. If you would mass produce the looms to reduce the capital expense and heavily lean into customer value, e.g. individual fittings via 3d scans, as my sister comment proposes, or even just letting me customize my sweater with motive, color choice, garment etc., this could radically change the cost to value ratio. The company that has published TFA sells extremely bland apparel in a shop that looks just like any mass produced clothing shop and leaves all of the customer value of custom production on the table.

Last but not least: This "3d knitting" seems to need only a fraction of the labor of traditional sewed clothes. If textile production didn't default to underpaid labor under precarious working conditions in low income countries, it would probably already be cheaper.

From 3d printed clothing, the obvious next step should be to have your phone take a 3d scan of you, and send it to the clothing designer to print it to your actual body size and shape. We could have truly unique sizing (none of this S/M/L/XL stuff)!