For years, companies in industrialised countries have been shifting their production to low-wage countries. But this trend has been gradually reversing. For example, Adidas is using 3D printers in fully automated “speedfactories” to manufacture its popular running shoes in Germany and the United States, and Bosch is building its new chip factory in Saxony. However, this trend won’t be creating a lot of new jobs, and only one sector will profit from it a lot.
A pair of “AM4 New York” sneakers currently costs more than $200 at the American sportswear and footwear retailer “Foot Locker”. AM4 stands for “Adidas Made for”, and behind it lies a revolution in shoe and production technology. Using huge 3D printers in so-called “speedfactories”, these colourful running shoes are being produced in a fully automated process – according to the wishes and special requirements of the runners. There are already shoes designed for different running routes in Paris, Los Angeles, New York, Tokyo and Shanghai.
One speed factory is located in Ansbach, in the south-eastern German state of Bavaria; the other is in Atlanta, in the south-eastern US state of Georgia. An estimated 1 million shoes will be “printed” this year. By way of comparison, a total of 409 million pairs were produced last year. The two factories only have a combined 320 employees, which makes personnel costs practically negligible. It’s a thriving business – but is it also a model for the future?
Most of Adidas’s 50 000 employees still work in low-wage countries. And things will stay that way too. There are no plans at present for additional “speedfactories”, says Adidas spokesperson Claudia Lange. But the new know-how from the highly automated and digitalised “speedfactories” will be transposed as much as possible to existing factories in Asia. Doing so will help make up for sharp rises in labour costs there.
For some time now, increasing digitalisation and automation have prompted companies in many sectors – such as pharmaceuticals, electronics and automobiles – to build new, highly automated factories right at home or to shift production facilities back from Asia. For example, Bosch, the world’s largest automotive supplier, is currently building a billion-euro chip plant in the eastern German city of Dresden. Some US pharmaceutical companies are producing at home again after decades abroad. While Caterpillar is assembling small bulldozers in the state of Georgia again, Tesla is building its electric cars in California.
Gabriel Felbermayr, the new director at the Kiel Institute for the World Economy (IfW), has been observing for some time now that the relocation of jobs from industrialised countries to low-wage countries – also known as “offshoring” – has “evidently come to a halt”. In many fields, one can even discern the opposite: a so-called “reshoring” trend. In regular surveys, researchers at the Fraunhofer Institute for Systems and Innovation Research (ISI) in the western German city of Karlsruhe have found that fewer companies in Germany are relocating production abroad than 10 to 15 years ago.
New technologies are also leading many executives in the fast-paced textile industry to reconsider current practices. Today, a T-shirt or pair of jeans manufactured in Southeast Asia often needs to travel for up to 30 days before it can be placed on the hanging racks or shelves of retailers like Zara, Macy’s or H&M. But, in future, fashion cycles will grow shorter and shorter. Consultants with McKinsey & Co predict that such a cycle – driven by Instagram and the like – will last only six weeks rather than six months. As a result, companies that want to keep earning money will have to produce and deliver much faster. But that will only be possible if much more is designed and sewn close to the end market.
And this trend is being reinforced more than anything by new sewing robots known as “sewbots”. According to one survey, a third of the purchasing managers of clothing companies questioned believe that automation will further strengthen the trend towards reshoring.
Sewbots have the potential to transform the entire global textile industry in the near future. This can already be seen, for example, in Little Rock, the capital of the southeastern US state of Arkansas. The Chinese company Tianyuan Garments has opened a new factory here and filled it with 330 robots manufactured by the US company SoftWear Automation. An estimated 23 million T-shirts will be sewn here each year. On an eight-hour shift, a sewing robot equipped with sensors and cameras can produce about 1 142 T-shirts. By way of comparison, a 10-person crew working on a standard production line can only produce 669 T-shirts in the same amount of time. For Tianyuan CEO Tang Xinhong, the factory is a milestone in the company’s history, and he is convinced that: “Around the world, even the cheapest labour market can’t compete with us.”
In any case, one factor behind the company’s decision to locate the new factory in Arkansas was probably the trade policies of the Trump administration. The new sewbots produced by SoftWear Automation are allegedly not allowed to be sold abroad. And, in recent months, fears of rising import and punitive tariffs haven’t prompted only Chinese companies, such as Tianyuan or the Taiwanese iPhone-manufacturer Foxconn, to expand existing factories in the United States or to plan completely new ones; it has also led Germany’s largest car manufacturers to do the same.
Conversely, Trump’s aggressive trade policies are also driving US companies abroad again. For example, the EU recently imposed €2.8 billion in retaliatory tariffs on US products because the United States, for its part, had increased tariffs on imports of steel and aluminium. This is why Harley-Davidson, the quintessentially American motorcycle manufacturer, now plans to relocate parts of its US production abroad.