Bags / Shoes & Accessories

Major shoe manufacturers Baocheng Industrial (9904) and Winterthur (9910) have recently issued announcements on the suspension and extension of Vietnam factories, and they will eventually suspend operations until August 15.

Not only Baocheng and Fengtai, but also the Longdian and Hongfu shoe factories, which are mainly based in Vietnam, have been faced with the problem of work stoppage due to the inability of the government to implement the "three-in-place" policy. According to industry sources, "transportation costs, The increase in raw materials, coupled with the unsatisfactory production, has not been reflected in retail prices yet, but American brands have always said that they will increase prices. It is estimated that they will not be able to suppress it!"

Footwear giants cannot cooperate with the government's "three places"

Since the large-scale diagnosis caused in April this year in Vietnam, nearly 140,000 people have been diagnosed. Among them, Ho Chi Minh City and its surrounding provinces and cities in the south are the hardest hit areas. For example, Binh Duong Province, an industrial town, has been reported in the latest wave of epidemics. Ten thousand people are infected with the epidemic.

It is understood that Vietnam only started to vaccinate in June this year. The vaccine was given first from factories with large populations in industrial areas. In June, most people from large Taiwan-funded factories had AZ. The factories are relatively safe, but the infection outside is very dangerous.

However, nowadays large Taiwan-funded factories have reported suspension of work, mostly because they cannot cooperate with the government's "three-site" (eating on-site, local production, and local living) policy. Only factories that truly achieve the "three-site" can operate. .

Lai Qijian, secretary-general of the Taiwan Footwear Industry Association, said that except for the infected factories that need to be temporarily suspended for disinfection, the remaining factories that meet the "three locales" can continue to operate, "but most factories can't do it, and most of the factories are production lines. , Pass one by one, it is difficult to maintain social distancing.

Vietnam is different from China. Vietnam focuses on family life and comes home after get off work. Therefore, most factories do not have dormitories and it is difficult to live on-site. "

Nike's Vietnam factory shuts down, freight costs tripled

Price increases may be unavoidable

According to an industry source, every Nike factory in Vietnam has stopped work and delayed shipments are serious. If there is a way to maintain the quarantine measures, stop and stop production. Production is not smooth; the mainland production lines are also short of jobs, with an average salary of 1,000. In dollars, the original drawdown was temporarily unable to find workers. In addition, the raw materials and shipping costs have increased three times during this period. "Although the cost has not yet been reflected on the retail side, some American brands have always said that they will increase prices. Can't hold it down." However, there is no clear announcement of the time and amount of price increase for brand shoe manufacturers.

Analysts pointed out that after the implementation of the measures to extend the downtime, in terms of production capacity, Vietnam is one of the main production locations of Baocheng's footwear business, accounting for about 45% of Baocheng Group's shoe production capacity, and Fengtai's position in Vietnam The production capacity also accounts for about 50%. The extension of the factory shutdown in Vietnam has had a significant impact on the short-term operations of the two major shoe manufacturers. At present, the industry plans to work overtime after the shutdown is lifted to increase output in response to customer orders.

However, it is estimated that even if the closure and resumption of work in the future are released, the production capacity will not rise too quickly, and the shoe industry will not achieve a return increase in one time. It is expected that full capacity production can be resumed between the end of the third quarter and the fourth quarter.

Previously reported: Closing the city! Vietnam infected nearly 8,000 people a day, Nike foundry announced extended shutdown

Footwear giants Baocheng and Fengtai announced:

Continue to stop work

Vung Tau Orient (TO), a Vietnam factory under Nike's main foundry shoe factory Winterthur (9910), was originally scheduled to suspend operations from July 19 to 24, but the dormitory or transportation vehicles in the factory were not able to satisfy the local government. Strict anti-epidemic requirements, Winterthur announced on the 23rd that the period of suspension of the TO plant will be extended to August 1.

This is after Winterthur's Vietnam Dona Victor (DV), Dona Pacific (DP), Dona Orient (DO), and the mold factory Dona Victor Molds (DVM), originally from July 17 to 23, and then postponed to 8 After the 1st of August, the suspension of operations of the TO plant was also followed up and extended to August 1.

As for Dona Standard Footwear (DS), the largest shoe factory in Vietnam under Winterthur, whether it will be renewed in the future has attracted much attention.

The shoe giant Baocheng also issued an announcement on the 23rd to announce:

The company's subsidiary Yue Yuen Industrial (Group) Co., Ltd., located in Ho Chi Minh City, Vietnam Bao Yuan Shoe Factory, due to the local government's epidemic prevention requirements and colleagues' health and safety considerations, the suspension period of the factory was extended to August 1, 2021.

The epidemic in Vietnam has spread

Nearly 30% of local Korean companies suspend work

Yonhap News Agency reported on July 25 in Hanoi:

According to the survey results released by the Ho Chi Minh Korean Chamber of Commerce and Workers (KOCHAM, hereinafter referred to as the Federation) on the 25th, as the new crown epidemic spread rapidly in southern Vietnam, 70 (27.5%) local Korean companies were forced to suspend operations.

Starting from the 19th of this month, the Federation conducted a three-day survey on operating rates of 254 member companies. The results showed that 36 Korean companies stopped working in Long'an, a densely concentrated area of Korean companies. Many Korean companies located in Ho Chi Minh (10), Binh Duong (9), Dong Nai (7), Qianjiang (3), Nanning and Yong Phuoc (2 each), and An Giang (1) have also suspended production. Although Samsung Electronics' home appliance production line in Ho Chi Minh is still operating, its operating rate has fallen below 40%.

According to local government regulations, Korean companies within their jurisdiction can only start production lines if they arrange for staff accommodation in the factory. Therefore, with the exception of large companies such as Samsung Electronics and CJ, it is difficult for small and medium-sized enterprises to arrange temporary accommodation for their employees and face difficulties.

The Vietnam epidemic shows little sign of slowing down

Vietnam successfully contained a limited COVID-19 epidemic last year, but the number of cases has increased sharply since late April this year. At present, about one-third of the country's 100 million people are subject to the lockdown order.

However, the Vietnam epidemic shows little signs of slowing down. The southern commercial city of Ho Chi Minh City, where the number of confirmed cases accounted for the majority of the country, announced yesterday an extension of the lockdown order.

At present, Vietnam is slow in purchasing and administering vaccines. So far, only nearly 4.5 million doses of vaccine have been administered. Vietnam is also developing its own vaccine. The authorities have expressed hope that herd immunity will be achieved in early 2022.

Shoe giants have shut down

Nike Vietnam-made sneakers may be out of stock

Nike, the global leader in sports goods, may be implicated, facing the crisis of out of stock of Vietnamese-made sports shoes.

CNBC reported that Panjiva, a supply chain research organization under S&P Global Market Intelligence, found that 49% of Nike's US seaborne imports came from Vietnam in the second quarter of 2021 (April-June).

However, Nike's two main suppliers in Vietnam, including South Korean shoe manufacturer Changshin Vietnam and Taiwanese-funded company Baocheng, have recently stopped production due to the severe COVID-19 epidemic in the region, which may cause the supply of Nike Vietnam-made sports shoes to raise alarms.

Nike's financial report data shows that for the 2020 fiscal year (as of May 31, 2020), the proportion of supply from Vietnam's OEMs accounted for about 50% of the total number of Nike brand shoes. According to Panjiva’s report, Nike’s imports from Vietnam are mainly footwear, which accounted for 82% of total imports for the 12 months ended June 30 this year.

The report pointed out that the US retail industry is preparing for the start of the school shopping season, and the COVID-19 epidemic in Vietnam is spreading, which is a big blow to businesses such as Nike.

In addition, in recent months, problems including shortage of containers and large traffic congestion in global ports have also exacerbated the supply chain's difficulties.