Adidas has recently confirmed the closure of its last factory in China, a move that mirrors Nike's decision a few years ago. This strategic shift is driven by the need to re-integrate global resources and the rising labor costs in China. Despite this closure, Adidas maintains over 300 partner factories in the country, ensuring that production remains unaffected.
Adidas, the world's second-largest sportswear manufacturer, has announced the closure of its last self-owned factory in Suzhou, China, scheduled for October this year. This decision aligns with the company's strategy to re-integrate global resources. According to Adidas officials, the closure will not impact production as the company continues to collaborate with over 300 partner factories in China.
The rising labor costs in China have been a significant factor in Adidas's decision. Over the past decade, China's labor costs have increased substantially. According to the National Bureau of Statistics of China, the average annual wage of employees in urban units increased from 36,539 yuan in 2010 to 90,501 yuan in 2020, representing a 147.7% increase over ten years source.
Adidas's decision is not an isolated incident but part of a broader trend among multinational companies. Nike, for instance, closed its last factory in China in 2009, citing similar reasons. The shift of production bases to regions with lower labor costs has been a common strategy for these companies.
Initially, companies like Nike and Adidas established production bases in Europe and America. However, to save costs, they moved their production lines to Japan. As labor costs in Japan rose, they shifted to South Korea and Taiwan in the 1970s. By the 1980s, the main production lines had moved to Fujian and Guangdong in China. Recently, with the rising labor costs in China, these companies are targeting Southeast Asia for lower labor costs.
| Year | Country/Region | Reason for Shift |
|---|---|---|
| 1970s | Japan | Rising labor costs |
| 1980s | South Korea, Taiwan | Lower labor costs |
| 1990s | China (Fujian, Guangdong) | Lower labor costs |
| 2020s | Southeast Asia | Lower labor costs |
The closure of Adidas's factory in Suzhou is part of a broader trend of rising labor costs and the need for industrial transformation in China. The Suzhou Industrial Park Administrative Committee has expressed understanding of Adidas's decision, aligning with the current trend of industrial transformation in the region.
As China's economy continues to develop, the reliance on cheap labor as a competitive advantage is diminishing. The focus is shifting towards higher value-added manufacturing and technological innovation. This transformation is essential for sustaining long-term economic growth and improving living standards.
Adidas and Nike face significant pressure from the consumer market. Adidas, in particular, has struggled to meet consumer expectations despite being a top sponsor of major events like the London Olympics. The company's strategic decisions, including factory closures, are part of its efforts to streamline operations and improve market performance.
Adidas's decision to close its last factory in China is a strategic move driven by the need to re-integrate global resources and rising labor costs. This trend is not unique to Adidas but reflects a broader shift among multinational companies. As China continues to evolve its manufacturing sector, the focus will increasingly be on higher value-added production and technological innovation.
For more insights on global manufacturing trends, you can refer to McKinsey & Company's report on the future of manufacturing.
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