Robots will not shift manufacturing away from Vietnam immediately

Photo source: adidas-group.com

In late May, German sportswear and equipment-maker Adidas announced that it would begin robot-based mass production of sports shoes in its home market of Germany in 2017, with a 4,600-square-metre SPEEDFACTORY in Ansbach, southern Germany. The event would mark the first time Adidas returned mass production to its home country, after moving it to Asia more than 20 years ago.

However, the plant’s operation does not mean Adidas will immediately shift production from Vietnam. In a recent statement responding to VIR’s query, Adidas said it would “absolutely not” stop working with subcontractors in Vietnam in 2017.

According to Adidas, Vietnam is a strategic sourcing country for the Adidas Group and its importance has grown over the last couple of years, with the company sourcing 41 per cent of its overall footwear volume from Vietnam in 2015, up from 39 per cent since 2014.

“Vietnam will continue to be a strategic sourcing country for us, with volumes expected to further increase going forward. We will continue to work closely with our Vietnam-based suppliers, to enable Adidas Group’s global growth in the years to come,” the company said.

According to Adidas, in 2015, the company sourced 301 million pairs of shoes globally. The company plans to increase sales by double-digits each year from now to 2020, meaning that it will look at producing an additional 30 million pairs of shoes annually.

“To enable this growth, we will expand our existing supply chain and will add considerable sourcing capabilities in various Asian countries,” the company said, explaining that it expects production volumes in the new SPEEDFACTORY to reach 500,000 pairs per year over the mid-to-long run.

With the new SPEEDFACTORY, Adidas looks to “herald in a new era in footwear crafting through the combination of the craft of shoemaking and cutting-edge technology.” In 2017, the company also plans to erect another SPEEDFACTORY in the US.

Footwear production may not shift from Vietnam immediately, but there is no guarantee that neither would electronics assembling, another pillar of the domestic economy. Also in late May, Apple and Samsung supplier Foxconn Technology Group was reported to cut 60,000 jobs in its Kunshan facility in the recent years thanks to robots.

In a statement sent to VIR, Foxconn confirmed that it has been investing in the automation of many manufacturing tasks in its facilities in China for many years now.

However, automation does not result in layoffs in China, according to Foxconn. Instead, “the automation efforts have been accompanied by reductions in the pace of recruitment and some jobs were not refilled when employees either left our company, as part of normal attrition, or were transferred to other positions,” the company explained.

The company did not directly answer the question of what the implication of automation is to Vietnam, but said that the automation efforts in each location are driven by the needs of each manufacturing process. “Across all of our facilities, we are applying a range of automation technologies to maximize efficiency and, through training, also enable our employees to focus on other aspects of our company’s operations,” they noted.

“As part of our long-term growth strategy, we will continue to use both manpower and automation in our manufacturing operations, and we expect to continue to maintain significant employee levels in our operations throughout China,” Foxconn said, again without mentioning the impact of automation to employment in Vietnam.

Wages have been rising in Vietnam. Moreover, the country’s “golden population” spell would only last till 2025, meaning it only has a maximum of 10 years left to capitalise on the abundance of working age people.