Clothing brand fleeing China's next "world garment factory" is rising

Release time:

2018-12-25

In the face of rising domestic labor costs and the continued high price difference between domestic and foreign cotton, domestic and foreign brands have "left". This piece of "pure land" in Southeast Asia leapt out, and Vietnam stood out with its outstanding regional environmental advantages. Vietnam has sufficient electricity, abundant water resources, stable political situation, and high quality of personnel, and the efficiency of garment workers is higher than that of neighboring countries.

More and more brands are starting to build factories in Vietnam.

It is understood that investment in Vietnam has very obvious investment advantages, and the cost of investing in factories is low. For garment enterprises, the investment burden is not large. High-quality enterprises in Vietnam can enjoy a 10% corporate income tax rate for 15 consecutive years, and enjoy the "four exemptions and nine halves" tax incentives. For the preferential policies and superior geographical location, domestic and foreign clothing brands went to Vietnam to start the "rush" journey.

Verjane: More orders, more land in Vietnam

Virginie has set up two factories in Vietnam a few years ago. After several years of development, the first factory is close to full capacity, and the production efficiency has reached more than 85% of the skilled workers in Shenzhen factory. The second factory building serves as the support for domestic production in the mainland. The third factory building was also put into use in April and is expected to develop together, achieve a planned annual production capacity of 30 million pieces for bust, close-fitting underwear and functional sports. In view of the addition of new customers and the increase in orders, the fourth plant of the company will also operate in the first quarter of 2019.

Just in July this year, Verjane said that it would purchase a piece of land to build a fifth factory building. As of the first quarter of 2018, the number of employees in the Vietnam factory has been far more than that in the Shenzhen factory. The group's asset growth in mainland China is also gradually decreasing, while Vietnam's non-current assets are gradually increasing. In addition, the trade tensions between China and the United States have also become one of the key factors in Virginie's turn to Vietnam.

UNIQLO: Vietnam Factory Added Among OEM Factories

This is the second year UNIQLO open cooperation foundry list. 80% of Uniqlo's orders are distributed in 184 factories in 7 countries including Bangladesh, Cambodia, China, and Vietnam, an increase of 38 compared to 2017. Among them, factories in Vietnam increased by 40%. Although China's foundry accounts for 60% of UNIQLO's total production system, the growth rate of Vietnamese factories cannot be ignored.

According to statistics from the Japan External Trade Organization (JETRO), Vietnam's per capita monthly wage is only half that of China, and it has a large number of low-cost young laborers, which is a favorable condition for the development of labor-intensive industries. And China's labor costs are rising, and the young labor force is decreasing year by year. Vietnam is increasingly hopeful of replacing China as the next "world factory.

Nike Adi: Fleeing China and Harvesting Vietnamese Labor

Nike moved to Vietnam earlier than Adidas.

According to the 2017 data of the American Fashion Association, the typical purchasing plan of American clothing companies is 30%-50% from China, 11%-30% from Vietnam, and the rest from other countries. At first, the purchasing strategy of American clothing companies was "China + many countries". With the development of Vietnam's manufacturing industry, it has now become "China + Vietnam + many countries".

According to public information from Nike and Adidas, nearly 50% of Nike's shoes come from Vietnam and 28% from China. As early as 2009, Vietnam was Nike's largest shoe producer. Adidas, which entered Vietnam later than Nike, produced more shoes in 2012 than in China. In 2017, Vietnam purchased nearly 50% and China purchased less than 20%.

China's foundry still has certain advantages, thanks to its advanced technology and the improvement of personnel quality. Countries in Southeast Asia, such as Vietnam, are following the old path of China. Perhaps when their technology and wages are similar to those of China one day, the relocation of processing plants of domestic and foreign brands will stop.

However, with the maturity of AI, automation and robotics, major processing plants will have different choices.

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