Manufacture in Asia
Apart from a brief but unsuccessful experiment with manufacturing in the US, Nike shoes have always been made in Asia, initially in Japan, then in South Korea and Taiwan, and more recently in China and Southeast Asia.
Nike began production in South Korea and Taiwan in 1972, attracted by the cheap labour there, and was soon joined by other companies including Adidas and Reebok.
But Nike went one step further. Instead of owning its own plants, it contracted production out to local Korean and Taiwanese.
companies. As Nike boss Phil Knight has said: "There is no value in making things any more. The value is added by careful research, by innovation and by marketing" (Katz 1994). Nike is now basically a designer and marketer of shoes. Manufacture is done by its Korean and Taiwanese suppliers. Once again, other companies have followed this model.
In the 1980s Nike tried to set up production in China, in partnership with state-owned enterprises, but this proved disastrous. But as China's door was opened to Taiwanese investors, Nike handed over production to these companies who simply moved across the Taiwan Strait into mainland China to take advantage of the cheaper labour there.
By the late 1980s changes in South Korea - labour unrest, increases in wage levels and loss of control of work places by Korean authorities - had made that country less attractive for investors, both foreign and domestic, who began looking for more congenial locations. With help from Nike in the form of guaranteed orders, the Korean companies, with whom it had by now developed a long-term relationship, moved their operations south to Thailand and Indonesia, in search of cheaper and less troublesome labour. Wages in those two countries were at that stage only a quarter of those in South Korea. Some of Nike's Taiwanese associates also set up in Southeast Asia.
Another reason for these moves was that in 1988, both South Korea and Taiwan lost their preferential access to US markets, which they had enjoyed as supposedly "developing countries" under the General System of Preferences (GSP). Korean and Taiwanese investors got around this by simply moving manufacture to Thailand, Indonesia and China and making use of the GSP privileges of those poorer countries.
Of Nike's seven top suppliers of sports shoes in 1992, three were Taiwanese companies producing mainly in China, three were South Korean, operating mainly in Indonesia, and one was a Thai company. (FEER 1992: 60).
Nike itself only employs some 12,000 people, most of them in the US. Its shoes and other products are produced by a workforce of perhaps several hundred thousand, employed by Asian suppliers.
As labour and other costs rise in Indonesia and Thailand, it is likely that Nike and its business partners will move again. They have already begun manufacturing in Vietnam (Bours 1996) and there are reports of the company also investigating possibilities in North Korea, Cambodia and India (Brookes and Madden 1995: 6).
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