News Center

In the first quarter of this year, Vietnam's domestic GDP grew by 5.03 percent year-on-year, making it the fastest growing economy in Asia under the influence of the global epidemic. News such as "the shift of global supply chains and the rise of new world manufacturing plants" and "accelerated foreign investment in emerging developing countries in Southeast Asia such as Vietnam" have also ignited anxiety in Vietnam's neighboring countries.
This small country, which has long ranked behind Indonesia, Thailand and the Philippines, has suddenly become the center of attention. In addition to the "crazy" export manufacturing industry, Vietnam's cross-border e-commerce live broadcast, new energy vehicle industry, and even "real estate speculation" are all considered as possible potential outlets by cross-border businessmen.
How is the potential of Vietnam's manufacturing "super factory" formed? Is the rise of "made in Vietnam" a "passive undertaking" under the pressure of the times "?
Made in Vietnam, produced by Chinese enterprises
International big-name contract manufacturers have chosen to build factories in Vietnam, which is nothing new.
This wave of heat on the "rise of Vietnam" began in April this year. However, the relocation of Chinese foundries to Vietnam began 10 years ago. Behind Vietnam's soaring export data, it is also inseparable from the transfer of Chinese manufacturers.
The manufacturing industry relocated to Vietnam is mainly concentrated in two categories: clothing and textiles and light electronic products. According to foreign media data, in the structure of Vietnam's export products in the first four months of 2022, processed products alone accounted for 89%, an astonishing proportion.
In 2021, more than half of the footwear production and more than 30% of the clothing production of the world famous sports brand Nike will come from Vietnam. Similar sports brand Adidas also has more than 40% of footwear products produced from Vietnamese factories. Electronic products such as Sony and Samsung also rely on cheap productivity in Vietnam. More than half of Samsung's mobile phone exports are made in Vietnam.
However, this does not mean that Vietnam has "taken away" the orders originally belonging to Chinese OEM enterprises. Compared with orders, the real dividend taken away by Vietnam is labor jobs, which also means that there is room for industrial upgrading in the country.
In the past ten years, China's large-scale listed foundry factories have successively moved to Southeast Asia, and Vietnam is one of their main target sites.
For example, Shenzhou International, China's largest integrated garment foundry leader, originally started in Ningbo, Zhejiang Province. At present, it has moved out garment factories in many countries in Southeast Asia, 28000 employees in Vietnam, two garment factories and a fabric base.
Similarly, Huali Group, an international big-name foundry that was just listed on the Shenzhen Stock Exchange in April last year, also moved its production plant to Southeast Asia early. The company's three new plants in Vietnam have already reached production last year.
As a foundry for Nike, Puma and other clothing brands, Huali Group now has 100 percent of its production capacity overseas. In addition, the production base of Taiwan-funded Hong Kong-listed foundry Yue Yuen Group is mainly in Vietnam.
According to data from the Vietnam Bureau of Statistics, Vietnam's total import and export volume in the first quarter of 2022 was about US $176.35 billion, especially the export volume reached US $88.58 billion, an increase of 12.9 percent year-on-year.
At the same time, according to a report by the Vietnamese official media "People's Daily", Vietnam's foreign capital has increased by 60% in the past three years. In the past five years, the share of foreign-funded enterprises in Vietnam's total exports has been more than 70%. In the first quarter of this year, the proportion of foreign exports reached 73.8 per cent.
Among them, investment from China, in addition to light industries such as clothing processing and manufacturing, is also reflected in the field of new energy and cross-border e-commerce. The photovoltaic investment of Chinese enterprises in Bei Giang Province of Vietnam alone has reached 2 billion US dollars. Vietnam is almost the largest overseas production base of photovoltaic products in China.
The three largest e-commerce platforms in Vietnam (Shopee, TiKi, Lazada) also have large stakes in Chinese Internet companies such as Tencent and Ali, and play an important role in their operations.
In this way, Vietnam's so-called "prosperity" is inseparable from the industrial transfer of foundries in neighboring countries.

Ten years of "relocation"
In 1986, Vietnam embarked on the road of "reform and opening up", and in 2006 Vietnam joined the WTO. In addition, Vietnam has signed free trade agreements and regional comprehensive economic partnership agreements with many countries and regions in recent years. These foreign trade promotion documents have enabled Vietnam to achieve "zero tariffs" on more than 90% of goods trade in the region ".
With preferential investment policies and relatively low labor costs, Vietnam has undertaken a lot of overseas capital from Singapore, South Korea and China, and has begun to become the transfer direction of labor-intensive industrial chains in various countries.
Among them, there are many factories from China. For example, the Chinese company Shenzhou International is one of the typical "southward migration" in the past decade, and half of its production capacity is now distributed in Vietnam.
Shenzhou International is not only Nike, Uniqlo, Adidas, Puma and other international big-name OEM factories. Not long ago, the Internet Red brand lululemon also became its OEM customers, bringing in a large order of US $30 million, which really "made clothing OEM a big business".
After China's reform and opening up, Shenzhou International's old factory in Ningbo has successively undertaken a large number of high-end clothing OEM orders from Japan, Europe and the United States. At that time, many eastern coastal cities in China became the undertaking places for the transfer of labor-intensive industries in developed countries.
As the OEM business is getting bigger and bigger, Shenzhou International has gradually built OEM factories for Nike and Adidas, as well as the "vertical integration" trend of modern factories. But then the proportion of domestic garment exports began to decline, and these foundry factories began to turn their attention to Southeast Asia.
As early as 2005, Shenzhou International's garment factory in Cambodia began to put into production. After 2013, the first and second phases of fabric factories invested in Vietnam have also been put into production. With the expansion of production capacity in Southeast Asia, there are WorldCom Vietnam ready-to-wear factories, Deli Vietnam ready-to-wear factories, etc., hiring local people to expand production capacity and digest these orders from high-end sports brands in Europe and the United States.
Compared with the domestic labor price rise and the tightening of environmental protection policies at that time, the low-cost labor force and tax incentives in Southeast Asia have become the direct factors to attract the relocation of Chinese factories, and the layout of Southeast Asia has become a necessity of the times.
After 2010, the domestic foundries opened a "decade of relocation" to Southeast Asia ". In the past ten years, the trend of production capacity of listed companies in the textile industry such as Shenzhou International to Vietnam cannot be underestimated.
According to Northeast Securities data, Shenzhou International layout in Southeast Asia fabric production capacity of 50%, garment production capacity of 40%. Jiansheng Group, another garment OEM enterprise, has three production bases in Vietnam, Haiphong, Anxing and Qinghua, with related production capacity accounting for 50% of the total production capacity. Blum Oriental and Huafu Fashion, whose main business is the production of colored spinning yarn, also have spindles factories in Vietnam, accounting for 60% and 15% of the total production capacity respectively.
In addition, electronics foundries such as Foxconn have also invested US $0.35 billion in Vietnam to build a factory with more than 60000 people. It also plans to invest US $0.7 billion in a new Apple foundry assembly plant.
Vietnam, which is full of overseas capital, slowly has the label of "a new generation of world super factory.

"Epidemic window" special opportunity period
Although the formation of the manufacturing export industry chain is not a day's work, but Vietnam's export data in the first quarter of this year, "against the trend of surge", mostly because Vietnam grasped the epidemic fluctuation window period.
In July last year, when Vietnam experienced the peak of the first round of the epidemic, it had faced a serious labor shortage. A large number of Vietnamese workers chose to leave their densely populated factories to return to their hometowns because of concerns about the epidemic, causing the industrial parks where Samsung, Apple and other electronics foundries were located to face closure and a severe impact on Vietnam's manufacturing industry.
Earlier this year, Vietnam experienced another round of severe epidemics, with many Southeast Asian foundries experiencing severe shortages of operating rates and capacity, resulting in a reduction in shipments. Shenzhou International, which has laid out its production capacity in Vietnam, was also affected, with its share price falling more than 30% at one point.
However, after March this year, with the improvement of the epidemic situation in northern Vietnam, the production of the foundry has been rapidly restored. Vietnam's export trade has seized the gap under the global epidemic and made efforts to undertake the industrial chain, thus achieving its advantages in standing out.
So in the short period of time disturbed by the epidemic this year, Vietnam showed a high growth rate, becoming the "world's factory" in a special period, squeezing the export order resources of neighboring countries affected by the epidemic.
Some domestic small and medium-sized factory owners who have been engaged in OEM for many years said that many European and American customers have decided to move their original domestic orders to Vietnam for production this year, causing many domestic OEM enterprises to lose a lot.
The large-scale listed foundry companies, which have already laid out in Vietnam, have taken on more production pressure overseas due to the loosening of the epidemic in Vietnam. In this case, capital, raw materials, and process technology do not originate in Vietnam, and the local labor force is only responsible for processing and assembly work.
According to the research data of Zheshang Securities, from 2016 to 2020, the labor cost of China's manufacturing industry is basically more than twice that of Vietnam. Both in terms of export volume and supply chain dimensions, Vietnam is clearly still in the stage of attracting overseas labor-intensive industries with low labor costs.