Adidas shuts down its manufacturing facility in China

Following Nike's closure of the only footwear production facility in China in 2009, Adidas is also preparing to close its only factory in China. This move again raised concerns about the advantages of China's manufacturing industry.

On the evening of July 18th, Adidas officially responded to its headquarters in China and will shut down its Suzhou production base in October. It has been a factory in China. This means that the advancing Adidas will fly away after staying in China for several years.

Everyone is guessing that its next destination may be Southeast Asian countries such as Vietnam or Cambodia.

On the 19th, Sabrina Cheung, director of public relations at Adidas China, said that Adi had shut down its own factories in China but it did not transfer the factories to other countries. Sabrina Cheung said that despite the closure of the factory directly under Suzhou, Adi will cooperate with more than 300 domestic foundries to streamline its manufacturing operations.

Ma Gang, an independent commentator on the sports industry, said that this is a signal of "major transition and transformation". Adidas announced its withdrawal at this node, which is caused by the laws of the market and the industry's cycle. “The end of the demographic dividend era makes garment processing companies face transformational choices. ODM (Original Design Manufacturing) is the most basic and practical choice in China.”

A monthly salary of 3,000 couldn't keep the operator "As early as a few years ago, especially after the financial crisis in 2008, international brand-name companies began to move their factories in China to Southeast Asia." Insiders said, "For these international brands In terms of companies, where labor wages are cheap, they will move to where."

In August 2008, France’s Le Figaro reported that due to rising wages in China, Adidas is preparing to shift production of some products from China in order to reduce production costs. The report also pointed out that Adidas President Haina had publicly stated that Adidas has more than 50% of sports shoes produced in China. However, due to the current rising wage requirements of Chinese employees and increased production costs, the company intends to reduce the proportion of production in China in the future. .

Although Hainer said it would reduce its production in China, it later responded that "the number of OEMs produced in China will never decline, nor will it shut down any market in China."

Some media broke the news that this year, adidas Suzhou production base has basically stopped recruiting.

"At the end of last year, the average monthly comprehensive income of an ordinary operator and a warehouse worker was more than 3,000 yuan. The basic salary was 1,500 yuan. There was also a full-time bonus, shift allowance, five insurances, and a factory truck. Transport, free work meals and accommodation and other benefits, it is this kind of treatment is still difficult to retain people.” Adidas Suzhou plant, an informed person to say so.

Coincidentally, the British media recently broke the news that Adidas paid only 15 US dollars a week for Cambodian garment factory workers who produce licensed products for the London Olympics.

Soon, Adidas responded that the average monthly salary of local workers was 130 US dollars, but even so, only 828 yuan was converted to ***, which was less than 1/3 of the wages of Suzhou workers.

Right now, the cost of labor in Vietnam, Malaysia, and Cambodia is only about one third of that in China. Zhong Shan, the vice minister of the Ministry of Commerce of the People's Republic of China, previously said that Vietnam’s manufacturing industry’s average wage is about 1,000 yuan per month, India is about 600 yuan, and the eastern coast of China is roughly between 2,500 yuan and 3,000 yuan. China’s labor costs have greatly increased. Higher than the surrounding countries.

This is a clear cost account.

Labor costs will be passed on to the foundry It is understood that 50% of Adidas's products are manufactured in China, in addition to a direct factory, currently more than 300 foundries throughout the country are still producing Adidas products. Manufacturers are mainly concentrated in the Yangtze River Delta and the Pearl River Delta region. The closing of the plant directly under Suzhou, Adidas's official statement also specifically proposed that "China also has more than 300 foundry co-cooperation", in the speech passed on behalf of the factory will not change the signal.

In the future, Adidas will only place orders for OEMs without considering the issue of labor costs. In other words, Adidas passed on the rising cost of labor costs to the foundry's home. Considering the orders, the profit can only be reduced by the OEM.

In addition to Adidas's factory relocation, in March 2009, Nike, the world's number one sports brand, closed the Taicang factory, the company's sole footwear production facility, and will transfer the footwear production business managed by the Winterthur Group to Winterthur. Factory in other parts of Asia.

“Given that the textile and Clothing industry is a labor-intensive industry, Adidas, Nike and other companies are paying more attention to labor costs in terms of cost reduction, and certainly not excluding transportation costs after moving to Southeast Asia,” said industry insiders, “as labor costs I believe that in the future, there will be factories in China moving to factories in the Midwest or Southeast Asia."

Li Peng, secretary general of the Asian Footwear Association, believes that if Adidas is to reduce production lines on a large scale, the impact on OEMs and equipment will be significant. Due to the integrity of the product process, many foundries are difficult to survive on their own. Under such circumstances, if the foundry wants to rely on orders from companies such as Adidas to survive, it must follow suit in Southeast Asia.

The closed factories in China “low labor costs, low rental costs, and low raw material costs” have all been added to the Chinese apparel industry. Today these words are used to describe Southeast Asian factories more accurately. The withdrawal of Nike and Adidas from China is an excellent footnote for general changes.

At present, Adidas has not announced the number of factory workers who have been dismissed locally. However, according to sources, compared with the scale of the 1400 Chinese employees who were demobilized at the Nike Taicang factory, the number of Suzhou factories was only about 160. "Because the Nike incident prior to Nike's dismissal of the Chinese factory was ahead of schedule, big brands such as Adidas should be more cautious about similar incidents," said Ma Gang.

The “rational abandonment” of international apparel brands at the two factories in Taicang and Suzhou, China, is typical. Herbert Heiner, Adidas Global CEO, once bluntly stated that because the wage standards set by the Chinese government have become too high, the company hopes to withdraw from China partially and move to regions where the labor force is cheaper.

An industry analyst close to Adidas stated that in the early years, China had been the region with the highest proportion of Adidas' global production capacity, and now this maximum production capacity was taken by the Indonesian factory, and the Chinese factory’s production capacity has already ranked second. “Apparel processing has always been an extremely price-sensitive industry. Along with the experience and scale of Chinese factory processing, there are costs in all aspects. In contrast, some countries in Southeast Asia have already had more impact on production costs. This kind of industrial transfer has shifted from the earliest Japan to the Taiwan region of China and later to mainland China, but now it is time to turn to Southeast Asia. Even in the same country, factories in the coastal areas of eastern China such as Suzhou are now facing the move to Henan and Jiangxi. The situation in Lukoku City is for the cost of confrontation, and Nike and Adidas share more than 20% of the market share in China, and the sales of Converse, Mizuno and other brands are only about one-tenth of their production capacity in China. Small, with little chance of withdrawal.” Chinese brands are also facing cost pressures, but due to the main battlefield of sales in China, it is unlikely that they will shift to the Southeast Asian market in the short term. ”

It is precisely because of the reasons that brand companies pursue the maximization of their profits. The low labor force has achieved the history of the “sweatshop”. According to foreign reports, in order to produce products related to the London Olympics, Adidas's factory in Cambodia allows workers to work up to 10 hours a day, 6 days a week. The workers said that their work environment is harsh. If they work eight hours a day, six days a week, the monthly salary is 61 US dollars, and another 5 US dollars.

It is reported that Adidas has accumulatively invested 100 million pounds in the Olympic Games. The London Olympic Organizing Committee had signed an agreement with Olympic goods manufacturers that required Olympic sponsors to provide workers with adequate basic living security wages. The trade union behind the trademark (organization name) stated that Adidas’ wage treatment to Cambodian workers violated this agreement.

The industry insiders stated that the reason why Adidas runs a factory in Myanmar is that the local labor costs are low and the wages are low.

In response, Adidas publicly responded on the 13th that the average wage of this factory worker is 130 US dollars, and the salary will be increased at the end of the year. However, some stakeholders believe that this Cambodian factory has violated the provisions of the London Olympic Organizing Committee, that is, sponsors must pay workers for sustainable and guaranteed wages.

A spokesman for the London Olympic Organizing Committee said in an interview with foreign media that the Olympic Organizing Committee places great importance on the allegations and will investigate the matter.

It can thus be seen that regardless of whether it is due to labor costs rising and leaving China, or hiring workers at low prices in Cambodia, it can be seen from the various behaviors of Adidas that in order to save on labor costs, the low-cost and high-profit marketing concept of international brand manufacturers has been exposed.

It is noteworthy that, in addition to Adidas and Nike will be transferred to factories in Southeast Asia, Clarks, K-Swiss, Bakers and other international footwear giants have been added in Vietnam, Indonesia's production line.

In June this year, 13 Chinese textile companies, including the well-known Tianhong Textile Group Co., Ltd., dispatched representatives to Indonesia to find a suitable site for construction. Based on this, Southeast Asia has set off an upsurge of spinning and building factories.

It is understood that as a result of Southeast Asia's products have more price advantages, China's textile export enterprises have been affected. Faced with the price shocks in Southeast Asia, there are textile business owners proposed to build factories in Southeast Asia, to make up for the disadvantages of the price.

Relevant person in charge of the textile company told reporters that domestic orders for low-end export products have been reduced by 1/3 this year, and many orders have been stolen by companies in Southeast Asia.

Apparel and textile companies are facing an imminent and difficult transition in the South China Mobile Nike annual report. In 2001, China’s factory accounted for about 40% of footwear production, ranking first in the world. In 2005, this number dropped to 36%, and in 2010, it further declined to 34. %. In contrast, Nike's production capacity in Southeast Asia, Vietnam, has been advancing rapidly from 13% in 2001 to 37% in 2010, replacing China's number one position.

“With the withdrawal of the Adidas Suzhou factory, its impact on its China trade headquarters in Shanghai is not significant, because many of its production in China is foundry, and the trade ratio is not large. The product brand marketing and design R&D More concentrated in foreign countries.” The aforementioned industry sources pointed out.

“Currently, China's garment processing industry facing transformation has basically two outlets. The first is to rely on the experience of long-term processing to continue to undertake the processing of certain categories of technical requirements, such as some footwear and socks products. It is more complicated than the general. Second, it is to actively do some ODM, although the early stage will be very difficult, but it is a necessary process.” Magang said.

ODM has more technical content than OEM (OEM). It participates in some of the original designs and therefore has a higher profit return. ODM also has a long process of brand building, and domestic sports brands represented by Jiangsu, Zhejiang and “Jinjiang Department” have also started to prepare for the transition.

Ma Gang pointed out that the lowest-end production cost advantage is no longer, and the high-end brand value is also the scarcity of Chinese clothing brands. Therefore, ODM, which involves both production and design, is the relative advantage of China's garment industry. “China has a large number of apparel companies and a large number of talents, and the foundation is better. At present, the relatively large-scale brands such as 361° and Anta are all started from production, while clothing brands such as Seven Wolves involved in design now also have their own. Advantages: ODM's profit return is also more substantial.” Jiang Qianqian Comprehensive Shanghai Securities News, 21st Century Business Herald Report