The writing is on the wall when it comes to the future of Norman Cheng’s operations in China, and like the protection offered by helmets his company produces, he sees a shift away from China as a matter of self-preservation.
To that end, he intends to open a smart factory in Vietnam next year – a US$30 million undertaking that embraces automation and will essentially be a replica of the plant he opened just last month in the southern Chinese manufacturing hub of Guangdong province.
The decision by one of the world’s largest helmet makers, Strategic Sports, was a long time in the making, and it was not borne out of capacity concerns. Cheng says they have plenty of that in China, where their first automation plant went into operation two years ago, capable of producing millions more helmets a year.
Instead, the move is a deliberate and tactical attempt to hedge against ever-growing geopolitical risks and retain his Western clients – many of whom have grown uneasy and more cautious about their supply chains, looking to hedge their bets by sourcing from a bigger pool of countries.
“We wouldn’t have had to build a new factory in Vietnam if we were only considering production capacity,” Cheng explained. “But from a geopolitical point of view, I have to have it in Vietnam.
“American clients have pushed us to go to Vietnam, and since they are very committed to placing orders there, we are going there.”
Currently, Strategic Sports employs more than 4,200 people, with more than 10 facilities spread across Asia, Europe and North America. And the most recent available figures show it took in US$210 million in 2021. Its 40 production lines make helmets for all types of uses, including sports, security and construction.
But even with those expansion plans, he has no intention of abandoning China. On the contrary, even after the opening of his Guangdong plant in Huizhou was delayed for nearly two years due to China’s strict zero-COVID controls, it is now a critical cog in his production machine. He chose Guangdong because the manufacturing hub has been building up sophisticated industrial clusters for decades.
But relying solely on China operations is no longer considered the safest bet for manufacturers, as the country’s “world’s factory” status is not as strong as it was in the past. Compounding concerns is the fact that China faces a worsening demographic crisis that has made it more difficult for companies to hire skilled labourers.
In Vietnam, Cheng’s planned facility will feature a high degree of automation that will allow 400 workers to make about 8 million helmets a year. It will also embrace green energy, with solar panels and rainwater-recycling capabilities.
And while his Huizhou factory mainly fulfils orders from European clients, Cheng admitted that those clients have expressed interest in trying to source from his Vietnamese factory in the future, with an eye on shipping to some Southeast Asian and European markets.
For the time being, however, many customers already have what they need. He said that’s because many overestimated market demand during the pandemic, when interest in sporting goods skyrocketed.
Source: https://www.channelnewsasia.com/asia/made-china-how-are-chinese-firms-responding-3513556