Manufacturing

Vietnam – a benefactor of the US-China trade war

As the trade war between the US and China shows no signs of reaching a solution, US brands producing in China, such as Victoria Secret, Abercrombie & Fitch and GAP,  have been seeing their shares drop by up to 5% due to their high reliance on Chinese manufacturing. The expected 25% tariff on all fashion garments imported to the US from China will be passed on directly to the consumer which means a direct rise in retail price on any goods produced in China. Brands who have not diversified their production yet face now the challenge of finding production partners in neighbouring countries.

Credit: readtoolead.com

Credit: readtoolead.com

The average retail price of clothing manufactured in China was US$25.7 per unit back in the second quarter of 2018, only slightly higher than clothing from Vietnam. A year later, China’s cost more than doubled to US$69.5 per unit.  The South China Morning Post cited a report that shows that China’s stranglehold on the garment supply chain continues, despite its price advantage being eroded rapidly.  Why is this and is it true? From a perspective from inside Vietnam we can tell you that the factories are flooded with inquiries, many from Chinese factories moving their production to Vietnam.  Why are the brands themselves not looking at Vietnam directly? These, are the late comers, rushing here now. They should have been doing this already – prices rising in China, trade tariffs or not, was expected.  Just like the neighbouring countries have been expecting a rise in production in all sectors as China loses it´s competitive edge.

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But what can Vietnam produce in terms of garments?  I have repeatedly read that low cost production such as teeshirts and polos is ideally placed in Vietnam, Bangladesh or Cambodia. While the Walmarts and Targets of the world do find in Vietnam an alternative solution with production at competitive prices in the tens or hundreds of thousands, Vietnam´s factories also produce quality, price competitive products in the lower volumes from 500 units.  I know because that´s the niche we ourselves operate in, that and even lower volumes… Vietnam is also very capable in the higher end garments, from just 100 units per style, designs that reach London and Paris and New York fashion week.  An example of styles can be seen here:  https://www.sourcestudio.co/gallery-main

VIETNAM as ASIA'S NEXT BIG SUCCESSFUL STORY

At Source Studio we are often asked why we chose #Vietnam as our #manufacturing base.

Here the #Business of #Fashion lays down some of the reasons we chose to focus on Vietnam for our fashion production:
Like South Korea, Taiwan and China before it, Vietnam is piecing together the right mix of ingredients for rapid, sustained growth.

Vietnam Manufacturing

Vietnam Manufacturing

Vietnam’s workforce is not just young but skilled. In global rankings, 15-year- olds in Vietnam beat those in America and Britain in maths and science. That pays dividends in its factories. At Saitex, a high-end denim manufacturer, workers must handle complex machinery—from lasers to nano-bubble washers—all to produce the worn jeans so popular in the West.

Vietnam is reaping benefits from trade deals. It is set to be the biggest beneficiary of the Trans-Pacific Partnership and a free-trade pact with the EU is in the works for 2017.

Vietnam already has a strong, often underappreciated, record. Since 1990 its growth has averaged nearly 6% a year per person, second only to China.

A relatively young population adds to Vietnam’s appeal. Whereas China’s median age is 36, Vietnam’s is 30.7.

Investors have also taken heart from the stability of Vietnam’s long-term planning.

Like China, it has used five-year plans as rough blueprints for development.

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