General

Vietnam is an important part of the global industrial chain and supply chain. However, the continuous spread of the new crown epidemic has caused a serious impact on the local manufacturing industry. In order to restore the economy as soon as possible, Vietnam lifted the lockdown measures in Ho Chi Minh City and its surrounding areas, where the manufacturing industry is well-developed, at the beginning of this month, but a large number of workers took the opportunity to flee the city. At some checkpoints, there were even scenes of workers kneeling down and requesting release.

Vietnam: The epidemic has not disappeared, "sick" unblocked a million dozen workers fleeing the city

A large number of Vietnamese migrant workers who were too late to undergo screening for the new crown were blocked at the checkpoint on their way home. They knelt down and asked the epidemic prevention department to let them go. Since the beginning of this month, motorcycle army from the southern industrial zone of Vietnam has been flooding into the western region continuously, causing congestion in many places.

According to statistics from the Ministry of Health of Vietnam, of the 157,000 people who returned home from Vietnam from October 1st to 8th, more than 1,000 people tested positive. The Vietnamese government estimates that the number of returnees may exceed 2 million.

Hundreds of employees fled because one person was diagnosed

In fact, the fear of the new crown has always been with the workers on the front line of production. In July this year, hundreds of employees forcibly fled from a factory in Binh Duong Province, Vietnam, only because an employee in the factory was diagnosed with the new crown that day.

In the past three months, Vietnam has added nearly 770,000 new confirmed cases, of which 19,000 have died from the new crown. The deaths are basically concentrated in Ho Chi Minh City, where the manufacturing industry is developed.

The government had no choice but to unblock the workers and took the opportunity to flee

Since many international companies have set up production lines in Vietnam, a large number of multinational companies that have stopped production due to the epidemic have suffered heavy losses in the past few months. Under pressure from all parties, the Vietnamese government chose to unblock it with illness, but it backfired, and the workers took the opportunity to flee the city. On October 3, a manufacturing company in Binh Duong Province, Vietnam responded to the call to resume work and production, but the employee attendance rate was less than 20%.

One-third of textile workers leave their jobs difficult to resume production

On October 6, the global shoe giant Baocheng Group announced the resumption of production, but the number of workers on the job did not exceed 30%, and more than 40,000 workers had not yet returned to work. Despite the adoption of salary increases and persuasion plans, the willingness of employees to return to work is still not high. According to statistics, there are about 3 million workers in the textile and garment industry in Vietnam, and about 1 million of them are currently on leave or vacation.

Pan Jin’e, an expert on Vietnam issues at the Chinese Academy of Social Sciences: In the three months from July to September, almost all factories in the south were closed. Under such a background, of course, its economy is obviously going to decline, because Vietnam’s dependence on foreign trade has reached. More than 200%.

Vietnam's economic performance hits its worst in 35 years

Data show that from July to September 2021, the country's gross domestic product (GDP) shrank by 6.17% year-on-year, the largest quarterly decline in the country in 35 years. Statistics show that in the first half of 2021, more than 70,000 companies in Vietnam closed down, a year-on-year increase of nearly 25%, and an average of about 400 companies went down every day.

Cut off! Vietnam processing plant suspends production of hundreds of millions of pairs of Nike shoes, unable to deliver

The impact of the epidemic on Vietnamese companies is spreading to more and more links in the industrial chain. Many large international companies have suffered heavy losses. Apple mobile phones and Nike shoes are facing the risk of supply interruption. In European and American countries, even the upcoming Halloween Facing the embarrassment of "no ghosts to play".

Affected by the epidemic in Vietnam, Nike shoes in the United States will face the risk of cutting off the supply.

Camilo Lyon, senior analyst at BTIG, USA: Nike currently has about 116 million pairs of shoes that cannot be produced.

Vietnam is an important production base of Nike, and 51% of its footwear products are processed in Vietnam. Due to strict local epidemic prevention measures, the Nike factory in Vietnam was basically closed from July to September.

It is estimated that the current product inventory of Nike in the United States is the lowest in 30 years and can only maintain sales for about one month. Statistics show that products made in Vietnam account for about 1/3 of the US footwear manufacturing industry and 1/5 of the US apparel manufacturing industry.

Also trapped by the epidemic, there is also the German clothing giant Adidas, which has lost about 600 million US dollars due to delays in delivery from the foundry. In the entire European and American regions, the most "horrible" thing about the upcoming Halloween is that it is possible that you can't buy costumes that pretend to be ghosts, because related products are difficult to produce in Vietnam factories.

In mid-August, more than 80 footwear companies such as Nike and GAP wrote to US President Biden, stating that "the soundness of Vietnam's footwear and clothing industry directly affects the soundness of the American industry."

Pan Jin'e, an expert on Vietnam issues at the Chinese Academy of Social Sciences: Vietnam exports a large amount of clothing, and the shutdown will have a great impact on the supply of European and American clothing, shoes and hats, and electronic products.

Factory shutdowns also affect technology companies in Vietnam. The camera modules of four models of iPhone 13 are assembled in Vietnam, and the lack of parts supply has obviously affected the product supply. At present, the waiting time for some models of iPhone 13pro in the United States is four weeks, while the waiting time in China and Japan will be as long as five weeks.

Not only Apple, but Samsung's life in Vietnam is not easy. The three major factories have been forced to shut down, and Samsung loses about 15 million U.S. dollars, or about 100 million yuan, every day.

Prior to this, the American giant Intel also planned to invest a huge additional US$475 million in Vietnam, or approximately RMB 3.06 billion. In the end, this plan also pressed the pause button due to the impact of the epidemic.

Poor response to the epidemic affects investment sentiment, "Made in Vietnam" hit hard

Disrupted by the epidemic are not only foreign-invested companies that set up factories there, but also Vietnam's ambition to develop manufacturing. Under the severe challenge of the epidemic, can Vietnam's manufacturing industry recover?

Vietnam’s “powerlessness” in the face of the epidemic has seriously affected the psychological sentiments of investors. Statistics show that the amount of investment in Ho Chi Minh City, Vietnam in August dropped by 43.6% compared with the same period last year.

Some multinational companies have begun to stop the process of relocating their factories to Vietnam, and a large number of production orders are also being transferred to other countries. Recently, a group of new executives from Lakeland Industries, a US manufacturer of protective clothing, took office. Their main task is to help companies transfer production capacity from Vietnam to China within a few weeks.

Charles Robertson, CEO of Lakeland Industries of the United States: This will help Lakeland Industries to transfer production capacity from Vietnam to China within a few weeks with the most optimized costs and tariffs.

Coincidentally, the American furniture manufacturing company LoveSac has recently begun to relocate its production from Vietnam to China.

Recently, the four major chambers of commerce representing investors from Europe, the United States and South Korea jointly wrote to the Prime Minister of Vietnam, stating that at least one-fifth of the manufacturing companies have transferred part of their production to other countries.

Song Hua, Professor of Business School of Renmin University of China: Vietnam has become a destination for many Western countries in the process of further adjustment and further transfer of the global supply chain in the past few years. Many multinational companies have readjusted their status in the Vietnamese industrial chain. Many orders flow back to other regions to cope with the peak sales in the West before the end of the year.

Recently, enterprises in various parts of Vietnam are resuming production in accordance with the "three locales" principle required by the government, that is, local production, local dining, and local accommodation to avoid external contact. However, because Vietnam is mostly labor-intensive enterprises, only about 30% of enterprises have the conditions to adopt this high-cost employment method. This means that for a factory with 2,500 employees, the average monthly accommodation and transportation costs for each employee are about 48 million VND, or about 13,600 yuan. The average monthly salary of Vietnamese workers is only 1500-2000 yuan equivalent to RMB. The labor cost is 7.8 times the previous.

Pan Jin’e, an expert on Vietnam issues at the Chinese Academy of Social Sciences: Vietnam’s share of processing and manufacturing is increasing, but in terms of affecting global industries and markets, I think it’s limited, and its overall market size is good. The capacity is not up to the point, and the production capacity is not up to the point. Vietnam can become a part of the global production chain. Only when the entire Southeast Asia cooperates can it become a "world factory".