Over the last five years, the percentage of imports from China relative to total imports from low-cost countries (LCCs) has been steadily declining. This trend is expected to continue, with 33% of global supply chain leaders stating that they have already moved or plan to move their business out of China by 2023.
China has seen a significant impact, with an estimated $32 billion loss in export volume between 2013 and 2018. This shift accelerated further in 2019, with an additional $40 billion worth of purchases being relocated to other LCCs.
Vietnam has emerged as a leading alternative, offering a lower-cost, reliable, and high-quality source of parts, materials, and manufactured components. Here’s why businesses are increasingly choosing Vietnam over China for their supply chains.
Why Should You Move Manufacturing from China to Vietnam?
Vietnam has strategically positioned itself as a competitive manufacturing hub, benefiting from business-friendly policies, growing infrastructure, and improved market access. With many companies shifting their operations from China, Vietnam is proving to be a smart, long-term investment for manufacturers.
If you’re considering moving your supply chain, here are six key reasons why Vietnam is the ideal destination:
1. Vietnam’s Rapid Economic Growth
In recent years, Vietnam has become one of the fastest-growing suppliers among LCCs. The country’s GDP has been on a steady upward trajectory since 2013, bolstered by foreign direct investment and increasing global demand for Vietnamese-made products.
Since 2015, Vietnam has ranked first in export volume growth among Asia’s top ten exporters, with a staggering 96.4% increase. This growth is driven by a trend known as “right-shoring,” where businesses relocate production to countries offering the best mix of cost and efficiency. Today, Vietnam is the eighth-largest exporter in Asia, accounting for $318 billion in exports as of 2019.
2. Lower Labor Costs
One of the most significant advantages of moving manufacturing to Vietnam is the lower cost of labor. As of 2020, the average hourly wage for factory workers in Vietnam was $2.99, compared to $6.50 in China. While wages have been rising in both countries, the rate of increase in China is significantly higher, making Vietnam a more cost-effective option for labor-intensive production.
For products with high material costs, even small savings on labor can lead to significant reductions in the overall cost per unit, providing manufacturers with a long-term competitive advantage.
3. Advanced Infrastructure and Logistics
Vietnam has made substantial investments in infrastructure to support its growing manufacturing sector. The country boasts modern shipping facilities, including three major ports—Saigon, Ho Chi Minh City, and the SSA International Terminal at Cái Mép—as well as several smaller ports.
For air shipments, Vietnam is well-connected through its four major international airports, complemented by a network of domestic airports that streamline logistics operations.
4. Political Stability and Business-Friendly Policies
Vietnam is committed to economic growth and industrial expansion. Over the past decade, the country has attracted $143 billion in foreign direct investment (FDI), with 59% of this going into the manufacturing sector.
Vietnam’s political stability is another major draw for international businesses. Unlike China, which faces increasing geopolitical tensions and trade conflicts, Vietnam remains a neutral and attractive partner for global trade. Its strong economic reforms, new free-trade agreements, and stable business environment make it a preferred choice for manufacturers seeking long-term growth.
5. Skilled and Dynamic Workforce
Vietnam has a young, highly motivated workforce with a strong work ethic and commitment to quality. The labor force is particularly well-suited for technical assembly, including the manufacturing of automotive components, smart devices, and other high-tech products.
Vietnam’s workforce also has a significant demographic advantage. The country’s labor force is, on average, seven years younger than China’s, providing manufacturers with a sustainable pipeline of skilled workers for years to come.
6. Strategic Free-Trade Agreements
Vietnam has been proactive in signing free-trade agreements (FTAs) to boost its global trade relations. In addition to being a key member of the Association of Southeast Asian Nations (ASEAN), Vietnam has expanded its trade partnerships worldwide.
These agreements have strengthened Vietnam’s economy and helped the country transition from exporting low-tech goods to producing high-tech products such as electronics, machinery, medical devices, and vehicles. For international businesses, this means access to high-quality manufacturing at a lower cost compared to China.
Partner with Truc Lam for High-Quality Manufacturing
Vietnam has firmly established itself as a leading choice for global manufacturers looking to diversify their supply chains. With lower costs, a stable political environment, strong infrastructure, and a skilled workforce, the country presents a compelling case for businesses seeking reliable and high-quality production solutions.
Truc Lam is a trusted partner in Vietnam’s manufacturing sector, offering world-class expertise and a commitment to quality. If you are looking to optimize your supply chain and reduce costs, contact Truc Lam today to learn how we can support your manufacturing needs.