Chapter 268 Southeast Asian Observation Sample

Low- and medium-end manufacturing industries have been flowing into Southeast Asia in a steady stream.

This is almost a consensus between China and America.

America hopes to move its manufacturing industry outside of China, while Chinese companies hope to avoid some tariff issues and reduce labor costs by moving factories to Southeast Asia.

China is also happy to see this because they hope to upgrade and transform their manufacturing industry, and the departure of some low-end manufacturing industries will help them achieve this goal.

However, in fact, when the scale of low-end manufacturing reaches a certain level, it can also use smart factory technology to upgrade and transform.

Because the essence of upgrading and transformation is to increase profits, speed up capital turnover, and improve industrial quality.

The reason why low-end manufacturing is called low-end is because it is determined by many factors such as scale, quality of the workforce, and technological content.

If the scale is too small, any market disturbance will affect the company, resulting in profits being eaten up, a decrease in customers, and the company going bankrupt.

The quality of the labor force is low, so of course the labor price is low, but the price in Southeast Asia is even lower than yours.

The technological content is limited and the risk of being replaced is extremely high.

These low-end manufacturing problems can be solved through a combination of scale and intelligence.

The most classic field should be the textile industry. Since 2015, companies like Adidas and Nike have been slowly moving the textile industry abroad.

Relocate to places like Bangladesh and Vietnam where labor costs are lower.

Later on, some places in China even took the initiative to hope that these companies would move away because they wanted to upgrade their industries and wanted more valuable companies to move in and no longer needed these low-end industries.

However, today, there are more and more unmanned factories in the textile industry, and it is entirely possible to build super-large-scale unmanned cluster factories like agriculture.

Just like the four major grain traders control the lifeline of global food, they have firmly grasped the textile industry, promoted the transformation and upgrading of enterprises, created several world-class companies in this field, and controlled the global textile market.

Intelligence does not mean blindly pursuing high-tech industries. Some industries that originally had little technological content can also achieve the same effects as high-tech.

It can even be combined with the financial industry to trade commodities in the futures market, making money in two ways.

An interesting piece of data is that in places like Bangladesh, starting from 2022, more than 80% of factories have begun to purchase automated equipment to replace manual labor.

In a year and a half, Bangladesh eliminated 20 textile industry jobs.

In fact, China should not clear out the so-called low-end industries, but should take the initiative to help low-end industries transform into large-scale intelligent industries.

And right now, Alfa is doing this in Malaysia.

At the end of last year, Alfa and Adidas signed contracts separately. The sports brand giant plans to invest more than US$10 billion in Johor Bahru to build a super unmanned factory in the next two years.

“Adidas has always had plans to build accelerated factories, and we launched a project called Speedfactory in 2016.

Through this project, we built automated factories for Adidas in Ansbach, Germany and Atlanta, America.

The core purpose of the project is to shorten the cycle time between order and product delivery. Reducing production volume and increasing production times will reduce inventory and improve responsiveness to customer needs. ”

Throughout Adidas' history, the purpose of the accelerated factory plan has been to manufacture what users need.

Demand forecasts from first-line stores are quickly responded to by local factories.

In fact, this is an advanced application of data analysis. Based on existing data, the future sales figures of footwear and clothing categories are analyzed, and then the accelerated factory will carry out targeted production.

Originally, I produced 100 pairs of shoe A, and it took me one month to sell 1 pairs. The remaining 80 pairs were not sold out until the next year. But now I have predicted the data in advance, so I only produced 20 pairs for the first time, and after they are sold out, I will produce them in batches of 80 pairs at a time.

This reduces the product turnover days to one month.

For sports brands like Adidas, turnover means profit.

The higher the turnover rate, the shorter the turnover days, and the higher the profit margin.

Because they turn goods into money, and money has interest.

There is no way to generate interest on goods.

Adidas' accelerated factories are essentially designed to solve the turnover problem, because even if it is an automated factory, its cost will not be much lower if built in Germany and America than in Southeast Asia.

“Obviously our accelerated factory program failed, but we learned a lot from that failure, and we have a new understanding of the evolution of the apparel supply chain and its requirements for logistics services and automation issues.

This time, I believe that through cooperation with Alpha Technologies, Alpha Technologies will be able to combine our understanding with their capabilities in the field of artificial intelligence to supplement the flexibility that was missing in the original accelerated factory plan.

That’s right, what is popular in our industry in Southeast Asian factories is the combination of medium technology and manual labor. However, this time, the factory we and Alpha are building in Johor Bahru will be completely experimental in nature and will almost eliminate the human factor.

A completely unmanned factory, if it operates well, Adidas will continue to increase its investment in Malaysia in the future and hand over all production capacity in Southeast Asia and even the Asia-Pacific region to Malaysia."

At the signing ceremony, Adidas CEO Bjorn Goulden was present in person, and Oraz attended as the CEO of Alpha Technologies. Princess Amina was there to support both the city of Johor Bahru and Alpha Technologies.

She never thought that Alpha Technology could also play a role in attracting investment.

If it weren’t for Alpha Technologies, projects like the Adidas unmanned factory would never have been given to Johor Bahru. Kuala Lumpur is always the first choice for these multinational companies, followed by Penang and then Johor Bahru.

"Alpha Technologies is also very pleased to reach a cooperation with Adidas. We are happy to inject the latest artificial intelligence technology from Alpha into Adidas to help it improve the automation level of clothing production and achieve full automation in production and material processing.

We expect the Adidas super unmanned factory in Johor Bahru to shorten the delivery cycle by more than 80%."

"Mr. Oraz, it's a pleasure to work with you. Please say hello to Mr. Samad for me. We are shocked by Alpha's leading position in artificial intelligence technology." Gulden was very enthusiastic at the dinner after the press conference. Press conferences like this, which do not involve products and have no explosive points, are usually reported by local media, which can be regarded as a benchmark for Malaysia's investment attraction.

There was not even a splash after the report, and the public had no idea that the collaboration between Adidas and Alpha would trigger huge changes in Malaysia and even Southeast Asia.

"Mr. Samad has always been mysterious. This is his characteristic." Oraz is already very skilled in dealing with such occasions. Gulden is not the only big shot he has met. He has met many big shots in the business world.

After the reception, the other party said that Temasek could increase its investment in Alpha, but Samad flatly refused when he learned about it.

Alphabet is not short of money now. After Tencent and Microsoft obtained Hornbill's technology license, they are continuously contributing cash flow to Alphabet.

“I fully understand that mystery has become Mr. Samad’s label, or it can be said that it is his personal trait. I fully respect Mr. Samad’s personal preference.

I hope to see Adidas place all of its manufacturing in the Asia-Pacific region in Johor Bahru in the future.” Goulden was excited.

Just seeing the model factory built by Alpha Technologies and a local garment factory in Johor Bahru was exciting enough for him. If Adidas could complete such a transformation under his leadership, he would be worthy of being recorded in the history of Adidas.

"I believe this day will come soon. Alpha's technology is even more incredible than what you have seen." Oraz was very confident. To be precise, Oraz was very confident in Samad.

Originally, Oraz didn’t believe that Samad was a Malaysian. He really didn’t believe that a Malaysian could create such a powerful artificial intelligence.

Now he believes it. If he were not a Malaysian, how could he insist on moving the factory to Malaysia, or more precisely to Johor Bahru? One must have a strong sense of homeland to make such a request.

If it weren't for such special requirements, Adidas even planned to cooperate with Alpha Technology to build 20 unmanned factories around the world in one go to achieve close-range supply.

For example, one would be built in Brussels and one in Germany to be responsible for the supply of goods to the whole of Europe.

Such special requirements have slowed down the expansion of Alpha's artificial intelligence significantly.

Oraz believes that Samad is not only a Malaysian but also a local of Johor Bahru and an out-and-out patriot.

There are growing calls, including among the Malaysian public, that Samad is a Malaysian.

The cooperation between Alpha Technology and Adidas did not attract much attention among the public, but it did attract considerable attention in the field of sporting goods.

Foreign sports brands such as Nike and Puma are watching the effects of Adidas' actions.

It is because Adidas has had a hard time in recent years that it has made such a radical transformation.

Like Nike, they lack motivation.

From the cooperation between Alpha and Adidas, we can see that not only are jobs in China being eliminated one after another, but jobs in Southeast Asia are also at risk.

And with Adidas's samples, the number of jobs in the entire textile industry will shrink sharply in the future.

No one talks about the impact on China, only about Southeast Asia.

In Southeast Asia, there are approximately 10 million people working in the textile industry.

A 2020 report by the International Labor Organization showed that the five ASEAN countries (Cambodia, Indonesia, the Philippines, Thailand and Vietnam) face the risk of 56% of jobs being replaced by automation in the next twenty years.

The workers affected are mostly lower-paid, less educated people. These jobs are most vulnerable to automation, so these workers are the hardest hit.

In fact, after Alpha began to show its fangs, the speed was not 20 years, but 5 years.

The proportion of jobs replaced by automation is not 56%, but more than 80%.

From an economic perspective, capital will be more efficient, but for individuals, it will be a real hurricane.

Alpha Technologies has already started prototyping for China in the south of China.

The improved capital efficiency brought by Alpha Technologies will also affect China's domestic textile industry.

A large number of international brands' textile industries will move to Malaysia, which will also be a fatal blow to people working in the textile industry in China.

(Such a scene will no longer exist)
Even without Alpha, the unmanned textile industry has been advancing, but with Alpha, the whole process has been accelerated, just like when you have the option to watch a movie at 5x or even 10x speed.

The whole scene became crazy like a ghost.

If you look at the ASEAN report, “The Future of Work in ASEAN”, it mentions that employment in Southeast Asia will shift dramatically from agricultural and manufacturing jobs to high-value service industry jobs.

That’s right, there was no Alpha, they all mentioned the word “dramatic”.

As for whether these people who were originally employed in agriculture and manufacturing can adapt to high-value service industry jobs, no one cares.

Anyway, they can't do it, there are plenty of people who can do it.

As for what they would do if they lost their jobs, this report did not mention it at all.

Technological progress is macro, and the individuals affected are micro.

When Lin Jia mentioned her idea, Chen Yuanguang also hoped that the example he set in the south would give China a way forward.

You can see what consequences will happen to the entire society after 1000 million people in Southeast Asia’s textile industry become drastically unemployed.

Chen Yuanguang believes that this is the limit of what he can do to improve the welfare of the lower-class people in China through this method.

You can't just rush into something when there's already a case in front of you.

(End of this chapter)