Well-known Chinese news site Sina recently reported that the sports product vendor Adidas decided to move a portion of its Chinese manufacturing work back to its robotic German facility, expecting reduced costs. Adidas entered China in 1997 for its manufacturing needs. However, starting in 2012, Adidas closed its Suzhou factory in Eastern China and began its strategy of leaving China due to increasingly higher labor costs. According to the International Labor Organization, the cost of labor in China has doubled since the year 2006. Compared to previous Adidas move-away directions, typically Southeast Asia countries, this time the manufacturing work moved to its home base in Germany, where automated robotic manufacturing lines only needed 160 people. Adidas is also developing equipment that can manufacture custom shoes right at their retail locations. In recent years, big-ticket brands such as Nike and New Balance have all focused on customization, which is not suitable for traditional labor-intensive factories. Another reason for Adidas to leave China was that German workers have much higher productivity. More and more companies are moving their manufacturing capabilities out of China. Adidas’ archrival Nike started its exit move in 2009. The same thing is occurring not just in the sports product category, but in the apparel industry as well, with brands like Zara and H&M. It seems China’s labor costs no longer matter.
Source: Sina, April 12, 2017
http://finance.sina.com/gb/economy/sinacn/20170412/23051585709.html