(Yicai Global) May 25 -- Li Ning is increasing investment in its first self-built intelligent plant as the Chinese sportswear brand turns away from outsourcing to have better control over costs and product quality in a highly competitive market.
Li Ning will spend CNY3.3 billion (USD466.8 million) to build its factory in southwestern Guangxi Zhuang Autonomous Region, up from the previous CNY1.5 billion, the Beijing-based firm said on May 23. The facility will comprise a smart factory, a supply chain base and a research and development center.
By transitioning from outsourcing to building its own factories, Li Ning can strengthen cost and quality controls and this will benefit the brand's reputation, industry analyst Cheng Weixiong told Yicai Global.
Li Ning bought a 0.4-square-kilometer plot of land in Nanning in 2019 to build a factory. At the time, Li Ning said the plant would be ready in five years’ time and that it was expected to get a yearly return of CNY3.5 million (USD494,800) per mu of land, which is equivalent to 0.66 hectare.
Founder and Chairman Li Ning, who is a former Olympic gymnast champion and named the company after himself, said previously that building a factory in Guangxi would not only give back to his hometown, but also boost the south China and even the Southeast Asian markets which have convenient logistics and an ample labor force.
Li Ning is facing stiff competition in China’s sportswear sector. Last year, the firm’s net profit climbed 1.3 percent from a year earlier to CNY4.1 billion (USD579.7 million), and revenue surged 14.3 percent to CNY25.8 billion (USD3.7 billion), according to its annual report. And the firm added 466 outlets in 2022, bringing the total to 7,603.
But it still lags far behind its biggest competitor in the country, Anta. Anta logged a 1.7 percent dip in net profit from a year earlier to CNY7.6 billion (USD1 billion), while revenue jumped 8.8 percent to CNY53.7 billion.
Editors: Dou Shicong, Kim Taylor