China is undeniably considered one of the countries with the highest industrial output and is the largest manufacturer in the world. Although the country remains the go-to export hub for most companies, some companies are shifting focus to other Asian countries to outsource low-cost yet high-quality products. This is due to the taxes imposed by the US, which has dramatically increased production costs. Thus, many companies have started moving production to Vietnam.
It has been a while since the US-China trade war started. While the trade war is between the US and China, their economies are so large that the effects of the tension economically impacts other countries as well.
As a result of the ongoing trade war, many manufacturers are deciding to move their businesses to Vietnam. Before the trade war, Vietnam was not on these manufacturers’ radars. However, the situation has changed. According to Chinese news articles, the trade war is pushing companies to move to Vietnam.
In the second quarter of 2018, Vietnam’s FDI reached US$3.6 billion. What’s more, Vietnam has a US$35.8 billion trade surplus with the US. This opens up a great opportunity for the Vietnamese market to develop its outsourcing sector. However, local business owners are worried that foreign companies entering the market might have a negative impact on their businesses.
Companies That Moved to Vietnam
Many multinational corporations are now shifting their attention from China to Vietnam. For instance, Apple decided to start test productions of AirPods in Vietnam to cut production expenses caused by high tariffs implemented by the US.
To add on, Samsung recently shut down one of its factories in China to try outsourcing in Vietnam. Nike manufactures over 12% of its total globally distributed products in Vietnam. According to Vietnam Customs, footwear exports reached $3.9 billion, which is up 14.1% from last year. This is an important turning point for Vietnam and is also the reason why Vietnam is working on creating a conducive business environment for new factories.
As companies shift their attention to Vietnam for an alternate sourcing hub, Vietnam’s economy saw a 7% boost in economy in the second quarter of this year. This makes the country 5th worldwide in terms of countries with trade surpluses with the US.
Through projections made by the World Group Bank, the Trans-Pacific Partnership signed in 2016 will see the country’s economy gain 10% in GDP and 30% in export value. Vietnam has become a friendly environment for the production of promotional products. US and European retailers who are stepping up their involvement in Vietnam include Zara & Target.
Why move production to Vietnam?
Lower Production Costs: Opening a business in Vietnam means lower production costs. As such, you can improve your bottom-line margins and increase your profits!
Low Labor Cost: Additionally, your business can enjoy the low labor costs in Vietnam. Despite Vietnam’s young and skilled workforce, the labor cost in Vietnam is still very low.
Young and Skilled Workforce: A younger workforce, coupled with well-educated and highly skilled talent, will enhance your company’s efficiency and productivity. Which company does not want a more efficient and productive workplace?
Save-Haven from US-China Trade War: Vietnam is a safe haven during the Trade War between the US and China. With business costs increasing exponentially in China due to the effects of the trade war, many companies are now shifting production to Vietnam to shield their businesses from the increased costs.
Moving Production To Vietnam
How we can help you
We here at ODM design, source and manufacture custom promotional products. Our team of dedicated in-house product designers can design the perfect custom promotional product for your brand. Not sure what you are looking for? No worries! We also offer product brainstorming sessions to come up with a range of products perfect for your brand! Feel free to contact us today, to find out how we can help your brand!
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