Vietnam sourcing is a complusary cause to most international buyers. As Vietnam has quickly grown to become one of the hottest manufacturing destinations in Southeast Asia, with low labor costs and abundant natural resources that have made it an ideal location for entrepreneurs looking to reduce production costs while maintaining a high level of quality. Whether you are looking to produce electronics, garments, or other goods, Vietnam has proven to be an ideal location due to its abundance of available resources such as skilled laborers, materials, and proximity to markets in China and the US.
Foreign-owned Vietnam manufacturers
Most factories in Vietnam are owned by Chinese and Taiwanese, they have rich manufacturing experience in China or other SouthEast Asia for many years. They can make your production from China or other SouthEast country to Vietnam smoothly. Also, some big brands like Samsung have built an R&D center in Vietnam. The foreign investment in Vietnam has been significantly increasing since 2014. Most of those factories are located in provinces Nai, Ha Noi, Tien Giang, Binh Duong, Bac Ninh, Quang Tri. Hanoi and Ho Chi Minh. Within these provinces, there will be many different sites based on their geographic location and surrounding environment. Each geographic site stands for one focus industry, they support each other in the entire supply chain. We have made a list of foreign-owned factories along with their locations.
Availability of capable manufactures for your product type
More than half of all Vietnam manufacturers are located in Hanoi and Ho Chi Minh city, they have core capabilities in supply chains, machinery, electronics, and technology. While there are more than 5,000 manufacturing companies in Hanoi city alone, most factories are foreign-owned. In Ho Chi Minh City, Vietnam’s manufacturing goods are made for export, slightly over 50% of businesses are multinational or foreign-invested. Many world-class brands set up their first base in Vietnam such as Gap and Nike because of their strategic location near China, Japan, Hong Kong, and Southeast Asia countries. The labor costs for production here are about 30%~40% lower than similar jobs in other major Asian locations like India and China.
Overall, Vietnam’s manufacturing has its labor cost advantage as well as import taxes benefit to some target export countries, expecially compared to China export to US market. But we have to admit that China supplier still play a important role in Asia as they have many years’ of international trading experience, China’s entire supply chain have reached most every industry in the world. So that’s why most Vietnam investment come from China or other countries that have relation to China.
Vietnam Electronics Manufacturers
A survey of major manufacturing centers in the north and south of Vietnam found that Chinese electronics manufacturing companies have flocked into Vietnam. The Asian Development Bank also recently issued a statement mentioning Vietnam’s growth, that Vietnam’s economy has maintained high growth in 2019 and 2020, reaching 6.8% and 6.7%, respectively.
Vietnam’s economy is still growing strongly with continued growth with domestic demand and inflows of foreign direct investment. The outlook for domestic consumption remains bright, supported by consumption growth. Income, unemployment, and inflation remain low. Vietnam is deeply integrated into the global supply chain, with a total import and export volume of nearly 480 billion US dollars, almost twice the GDP.
In the Haiphong industry park, many China domestic listed companies have opened their factories. Like China’s motor industry leader – Wolong Electric Drive, China’s largest airbag manufacturer – Chinachem Technology, China’s leading electronic components company – Sanhua Zhikong, and China Micromotor Industry leader – Dayang Electric.
More companies are open production in Vietnam. According to incomplete statistics, since 2008, more than 60 A-share listed China companies have announced their investments in Vietnam, and just from 2017 to 2018, nearly 20 China companies have published announcements. During the same period, the scale of foreign investment received by Vietnam continued to rise, and the total foreign direct investment in Vietnam in 2018 reached US$35.4 billion.
In addition to the southern and northern regions of Vietnam, the technology industry in Da Nang, the central region of Vietnam, has also gradually developed after IBM entered. Now, electronics manufacturing has become the backbone of Vietnam’s manufacturing industry. Electronics and mobile phone products accounted for 25% of Vietnam’s total exports in 2018, surpassing the traditional textile industry. It is not difficult to imagine that with the completion and improvement of the electronic manufacturing industry chain, more electronic technology companies will flood into Vietnam. Ten years is enough to create prosperity for an industry. We have experienced it and will witness it again.
Vietnam Plastic Manufacturing
According to the assessment of the Ministry of Industry and Trade of Vietnam, in the period of 2010-2020, the plastics industry has the highest growth in Vietnam, which an annual growth rate of 16% to 18%. Right after the telecommunications and textile and garment industries, the average annual rate of some products is nearly 100%. At present, Vietnamese plastic products have been exported to nearly 160 markets around the world.
Till now, there are more than 200 plastic companies in Vietnam, mainly concentrated in Ho Chi Minh City, accounting for 84%, of which private companies account for 99.8%. Domestic companies account for 85%, foreign companies only account for 15%, but their investment funds account for 40%.
Vietnam Clothing Manufacturers
The World Bank predicts that if the Vietnamese government undertakes further structural and institutional reforms, Vietnam’s national income level will be on par with Malaysia’s current income level by 2035.
According to the East Asia Forum, the Washington-based multilateral lender predicts that the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), signed by representatives of 11 countries on February 4, 2016, will be a milestone, and by 2023 Vietnam’s GDP will increase by 10% annually.
In addition, the Vietnamese government predicts that the sales volume of the textile and apparel industry in Southeast Asian countries will increase by an average of 10% per year from 2018 to 2025.
Bangladesh and Vietnam are both competing for business opportunities diverted from China. Many Chinese companies are considering expanding their business by setting up production bases in other Asian countries and regions.
Bangladesh has more than 4,500 garment factories and about 1,500 textile factories, and Vietnam has 6,000 textile and garment factories combined. Bangladesh is renowned for its huge capacity to manufacture low-end products at affordable prices and of viable quality. Vietnam, on the other hand, is more value-oriented, has strong backward linkages, and has many educated and skilled workforces.
Vietnam has come a long way from being poor and backward to becoming a middle-developing country. Since 1986, Vietnam has carried out key structural reforms in many areas, including state-owned enterprise reform, promotion of private enterprise development, fiscal reform, public expenditure management, and trade liberalization. A series of reforms have promoted the development of Vietnam’s textile and garments. Vietnam’s textile and apparel suppliers provide a large number of jobs for the country and are the lowest value-added link in the global apparel supply chain.
In 2019, the revenue of Vietnam’s textile industry was US$39 billion. Vietnam suppliers have set a revenue target of US$50 billion for the textile and apparel industry by 2020. Vietnam’s textile industry has sprung up from the north of the country, and many foreign-funded companies have invested here because of the skilled skills and cheap wages of Vietnamese workers. Compared with the United States, Japan, and China, Vietnam suppliers pay workers the least. However, the products produced by the Vietnamese are of good quality and low prices.
The Vietnamese government has adopted flexible policies to help the textile and apparel industry leverage its advantages and attract foreign and local companies to invest. Under the role of the textile and garments, Vietnam is expected to become one of the “Four Asian Tigers”. Typically, government policy allows duty-free import of raw materials, provided that the raw materials are re-exported into apparel products within 90-120 days. Vietnam’s textile and apparel industry already has the ability to quickly process new orders.
Vietnam’s accession to the World Trade Organization in 2017 has brought huge opportunities for its own development. In addition, under the influence of the CPTPP agreement, Vietnam’s textile and apparel products are very popular in the US market. Although Bangladesh has not joined the CPTPP, its garment export business in the United States has not been greatly affected, and the export volume of garments has not declined.
In January 2020, the outbreak of COVID-19 in China caused fabric manufacturers to shut down production, thereby disrupting the supply of fabrics to Vietnam. Later, in March, the epicenter of the epidemic shifted from China to the West, and the European Union and the United States canceled a large number of orders, causing huge losses to Vietnam’s garment manufacturing industry.
About 70 percent of apparel makers reportedly cut shifts and cut staff numbers starting in March. Clothing makers cut jobs by another 10% in April and May. Data from Vietnam’s General Department of Customs showed that in the first quarter of 2020, the country’s exports and imports of all textile and apparel products fell sharply.
Although the new crown pneumonia epidemic has hit Vietnam’s textile and garment industry, it has provided some valuable lessons for the recovery of the industry and pointed the way forward. First of all, it is necessary to establish a stable supply chain of fabrics and raw materials, which mainly depends on the development of domestic fabric manufacturing industry.
Second, to reduce over-dependence on some major exporting countries and diversify export demand. Vietnam should make good use of free trade agreements, especially the newly signed CPTPP agreement, to open up new export markets.
Opening up new markets helps drive the development of the textile and apparel industry. Manufacturers in Vietnam should also pay more attention to the domestic market and develop new products. During the raging period of the new crown pneumonia epidemic, domestic and international demand for medical antibacterial masks and protective clothing will help alleviate the impact of the epidemic.
Finally, Vietnam’s garment manufacturers need to transform from a labor-intensive CMT model to a capital-intensive model, thereby achieving higher profits and being able to respond more quickly and robustly to external shocks. Facts have proved that companies in the OEM and ODM models can respond quickly in the face of the new crown pneumonia epidemic and better cope with the crisis.
Vietnam’s logistics and infrastructure
According to statistics, the total length of highways in Vietnam is 630,564 kilometers, but the total length of expressways in operation is less than 2,000 kilometers. In addition, the infrastructure connecting roads and seaports is still severely lacking, making Vietnam’s logistics costs uncompetitive.
Addressing deficiencies in infrastructure and institutional policies is seen as an important solution to reduce logistics costs and create momentum for Vietnamese enterprises and their commodities.
Tran Thanh Hai, deputy director of the Import and Export Bureau of the Ministry of Industry and Trade of Vietnam, said in an interview with VNA reporters that over the past 10 years, Vietnam’s expressway and national road system has been expanded. Vietnam has also built many large ports, which play a window role in international transit; build new airports, and upgrade existing airports. However, rail infrastructure is an underdeveloped area and one that has not yet fully utilized its transport role.
In the past 10 years, the average annual growth rate of Vietnam’s GDP has often been between 6-8%. Both commodity production activities and commercial activities showed rapid, resulting in a substantial increase in demand for logistics services and logistics infrastructure. However, domestic logistics services and their infrastructure have failed to meet market demand, resulting in still high costs in this field.
Another problem is that most Vietnamese enterprises are small and medium-sized enterprises, and their governance level and human resources business level cannot meet international standards, so their operational efficiency is not high.
In order to improve this situation, Chen Qinghai believes that supporting measures need to be taken.
He said that the government needs to propose specific policies and directions for promoting the development of the logistics sector. These include policies related to local development and transit policies.
In addition, administrative reform efforts and digital transformation are to be continued. For logistics infrastructure, in addition to investing in expanding infrastructure, attention needs to be paid to its connectivity to improve the efficiency of various individual logistics infrastructures.
For logistics enterprises, it is necessary to establish directional large enterprises and create attractiveness for small enterprises in order to improve the efficiency of the logistics field. In addition, it is necessary to increase the application of technology in the field of logistics.
Training high-quality human resources is also an important factor that helps reduce logistics costs and creates momentum for the field to quickly catch up with the world.
Quality Control for factory in Vietnam
Here is some recommendation for the quality control of manufacturing in Vietnam:
1. Choose factories with qualifications. These factories’ production has a complete quality management system. The products have passed incoming materials, online inspection, and finished product final inspection before export.
2. Hire a third-party inspection company for shipment inspection.
3. Require the factory to purchase product quality insurance, so that the loss due to product quality problems can also be obtained after the product is sold.
Which companies and brands manufacture in Vietnam?
Before the outbreak, big brands of leather shoes such as Nike, Adidas, New Balance and Lululemon were also increasing their orders in Vietnam.
During the outbreak, it is inevitable to cancel or postpone orders, but through this difficult time, Vietnam’s leather shoes and luggage industry will continue to attract the attention of importers in the United States and other countries.
Why do European and American countries across the vast sea of people for Vietnam Sourcing?
Low labor costs are a major advantage of Vietnam attracting thousands of foreign companies to invest and operate in Vietnam. An executive of a domestic clothing company revealed to the high-end headhunter of Guardian Blue that the labor cost in Vietnam only accounts for about 60%-80% of the domestic production capacity. Even though wages for Vietnamese workers and management have been rising in recent years, the overall cost is still lower than domestically.
The latest building factories in Vietnam mainly focus on shoes and clothing, electronic products and parts, and mechanical equipment parts, among which there are also some internationally renowned brands, such as Uniqlo, Nike, LG, Intel, and so on. Most of the shoes produced in Vietnam by these factories are exported to overseas markets. Today, Vietnam has become an important shoe-making base in the world.
In fact, the most attractive thing about Vietnam is its tax incentives. Products sold to Japan, South Korea, India, and other countries can achieve “zero tariffs”, and can also bypass the higher trade thresholds faced by direct exports to Europe and the United States. Enterprises are exempt from tax for the first three years in Vietnam, the tax rate for the third to fifth years is 5%, and the subsequent tax rate is about 10%, which is lower than the domestic level.
What are the major industries in Vietnam?
Vietnam’s import-export is concentrated in Ho Chi Minh City, Hanoi, Bac Ninh, and other places.
Ho Chi Minh City is one of Vietnam’s economic centers. Its industries mainly include textiles, machinery, sugar refining, rice milling, and tobacco. Its total industrial output value accounts for about a quarter of Vietnam’s total industrial output value. In order to attract foreign investment and accelerate the pace of construction, Ho Chi Minh City has opened up the Ling Thong Export Processing Zone and the Sin Thuan Export Processing Zone.
Hanoi has a large number of central and local large and small enterprises, such as Hanoi Machine Tool Factory and Tran Hsin Dao Machinery Factory, Venus Rubber Factory, Thang Long Cigarette Factory, Uni-President Motor Factory, as well as auto repair factories, bicycle factories, clothing factories, rice milling factories. Since the 1990s, Hanoi’s industry has developed rapidly. The average annual rate of industrial production was 19.1% from 1991 to 1995, 15.9% from 1996 to 2000, and 20.9% from 2001 to 2003. In addition, there are 8 industrial parks, 5 large-scale industrial parks, and 16 small and medium-sized industrial clusters. Non-state-owned economic institutions are expanding rapidly. Hanoi has its own production system, with industrial sectors such as machinery, chemicals, textiles, sugar refining, cigarettes, etc. Among them, machine manufacturing has become the center of the country. For example, the Hanoi Machine Factory can produce various high-precision machine tools and new agricultural machinery. Supplying the whole country, Hanoi has changed from a consumption city to a production city.
Over the past few years, Bac Ninh Province has introduced companies such as Canon, Japan’s ORIX Financial Group, Taiwan’s Foxconn Technology Group, and Vietnam-Singapore Industrial Zone.