(Yicai Global) Feb. 8 -- Cambodia was Adidas’ largest garment manufacturer in 2021, overtaking China, as the German sportswear giant turns to Southeast Asia to fulfil its manufacturing needs. Adidas’ incoming chief executive officer will need to tackle the tricky issues of manufacturing in China and the Chinese market, where sales are sliding.

Cambodia made 21 percent of Adidas’ sports clothing in 2021, followed by China with 20 percent and Vietnam with 15 percent, according to the Bavaria-based firm’s financial report. Back in 2013, China was the biggest producer at 33 percent, followed by Indonesia with 11 percent and Vietnam 10 percent for Vietnam.

Adidas’ sales are also tumbling in China and have dropped for six consecutive quarters due to the Covid-19 pandemic, changes in consumer preference and stiff competition. The sportswear giant said at the end of last year that it will reduce the number of outlets in China to 8,000 from 12,000.

The replacement to former CEO Kasper Rorsted, who stepped down ahead of schedule earlier this year, will have to reverse the decline in the Chinese market.

And in terms of production, China is faring even worse with footwear. Indonesia makes just over a third of Adidas’ sports shoes, at 36 percent, Vietnam produces 30 percent and China only 15 percent.

And it is a similar situation with Nike. More than half of Nike’s sports shoes are manufactured in Vietnam, a quarter in Indonesia and 21 percent in China.

In pursuit of lower costs, many Chinese manufacturers are moving production to Southeast Asia. Shenzhou International Group Holdings, one of Adidas’ biggest suppliers, is building more plants in Cambodia and Vietnam.

Shoe maker Huali Industrial Group has also made Southeast Asia a major production base. The Zhongshan, Guangdong province-based firm has shifted all its shoe factories overseas and is building new plants in Indonesia and Myanmar, according to its 2022 financial report.

Apparel company Sabrina pays its workers in Cambodia about CNY1,000 (USD150) a month, much less than in coastal areas in China, Chair Zhou Yaling told Yicai Global previously. Wages in Vietnam are higher than in Cambodia but lower than in China.

Chinese manufacturers need to improve their research and development centers, Zhou said. “We started about five years ago to upgrade our R&D center in Kunshan, near Shanghai, to set standards, and we have factories in Southeast Asia and even South America. Manufacturing in China will gradually improve in terms of design and techniques, but output will be smaller.”

Editor: Kim Taylor