Adidas production is 90% Asia-based, such as at this facility in Sialkot, Pakistan
Adidas production is 90% Asia-based, such as at this facility in Sialkot, Pakistan © Bloomberg

Asia’s entrenched supply chain makes the prospect of moving significant manufacturing back to automated factories in the developed world an illusion, according to the chief executive of Adidas in comments he said applied across the sportswear industry.

“Our production landscape is 90 per cent Asia-based. I do not believe, and it’s a complete illusion to believe, that manufacturing can go back to Europe in terms of volume,” Kasper Rorsted said last week during his first trip to Asia after taking the helm of the German company in October.

A riposte to political rhetoric about the return of manufacturing after a decades long move to Asian outsourcing, his comments also contrast to those of his predecessor Herbert Hainer, who told the Financial Times last year production was “coming back” to Germany.

Adidas does plan to ramp up production at fully automated “speed factories” in Germany and Atlanta staffed by robots, and this month announced a partnership with Silicon Valley start-up Carbon to produce trainers with 3D-printed soles at faster speeds.

But Mr Rorsted said: “I don’t see full automation in the next five to 10 years,” adding that Asia’s semi-automated manufacturing is still significantly faster than any 3D printing technology. The automated plants will manufacture about 1m pairs of shoes annually — a tiny fraction of the 360m pairs the company sells globally each year.

Adidas CEO Kasper Rorsted says of shifting production to the US that ‘financially it’s very illogical and highly unlikely that will happen’
Adidas CEO Kasper Rorsted says of shifting production to the US that ‘financially it’s very illogical and highly unlikely that will happen’ © AFP

Adidas’s largest market is the US, where companies have been under pressure from the Trump administration to announce manufacturing bases in America.

“[Moving] to the US, the only thing you get out of it is potentially a political interest, you are moving into a market where you have no competence. Just financially it’s very illogical and highly unlikely that will happen. And that goes for the entire industry, I’m not speaking just for Adidas,” said Mr Rorsted.

“What you’re going to see is sophisticated manufacturing technology manufacturing shoes for a very small market segment, and then you’re going to see those sophisticated manufacturing technologies taken back into China,” he said.

Rising wages in China and a rising number of labour disputes have pushed many apparel manufacturers to shift production away from the Asian powerhouse to south and Southeast Asian countries.

But China was Adidas’s fastest-growing market last year, with a 28 per cent sales expansion which it predicts will remain in “double-digits” this year, increasing incentives to remain.

“Why will you have manufacturing in China?” said Mr Rorsted. “Because of the size of the market, you want speed to access the market. I’m not concerned about jobs in China, we have been a net creator of jobs in China, but the jobs will change over time.”

Asian plants will become more automated, he said, but there were some processes of the roughly 120 steps in creating an Adidas shoe that remain stubbornly resistant to automation. “The biggest challenge the shoe industry has is how do you create a robot that puts the lace into the shoe,” Mr Rorsted said. “I’m not kidding. That’s a complete manual process today. There is no technology for that.”

Twitter: @hancocktom

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