According to a report on the 16th by the American Quartz Financial Network, in the past few years, American companies have been transferring manufacturing from China to neighboring Southeast Asian countries, on the one hand to take advantage of cheap labor in other countries, and on the other hand to avoid special measures. Tariffs imposed during the Trump administration’s trade war with China. Vietnam, Cambodia, Indonesia, Myanmar and Malaysia have been the most popular destinations for U.S. companies to open new factories.
Now, however, some companies are abandoning those efforts and moving factories back to China after factories across Vietnam closed due to the coronavirus epidemic.
Roger Rollins, chief executive of footwear and accessories conglomerate Designer Brands, according to a September 14 management meeting note from FactSet. (Roger Rawlins) said: “It’s really crazy to think about how much effort everyone has put into leaving China, and now the only place you can buy goods is China – it’s been a roller coaster ride for everyone.”
Quartz Finance Network pointed out that after June this year, the highly contagious Delta variant strain of the new coronavirus led to a surge in infection cases across Vietnam. The outbreak threatened the entire country, and the country only had 4% of the population has been vaccinated. In response, the Vietnamese government closed factories and ordered them to reopen only under strict conditions.
These restrictions have significantly reduced Vietnam’s manufacturing output and begun to erode the profits of global brands. Adidas, for example, has said production delays in Vietnam will cost the company $600 million in sales this year. Executives at Hooker Furniture estimate that sales of their Home Meridian International brand will drop 30% this quarter due to the lockdown.
The report pointed out that some companies have responded and reversed their transfer to Vietnam as soon as possible. Charles Roberson of protective clothing maker Lakeland Industries said on a Sept. 9 earnings call that the company has hired new managers to help the company “bring production capacity to capacity within weeks.” From Vietnam to China.”
Some companies are taking a more cautious approach, expanding across the region. Hooker Furniture CEO Jeremy Hoff said during an earnings call on September 9. “We’ve actually diversified quite a bit outside of Vietnam,” but he also admitted: “Frankly, we need to go back to China when necessary.”
The report also mentioned that despite another cost – the US tariffs on Chinese exports, some companies still insist on moving their factories back to China. Shawn Nelson, CEO of furniture maker LoveSac, said during a Sept. 9 earnings call that his company had to shift production orders from Vietnam to China. “We know that inventory from China will be affected by tariffs, but this allows us to maintain inventory, which is very important to us and our customers,” he said.
Garment workers at a factory in Hanoi are making men’s suits (screenshot of report)
Quartz Finance Network said that during the epidemic, China Earned a reputation for stability. For many, returning to China is the best option in order to ramp up production ahead of the upcoming holiday shopping season. Willy Shih, a management professor at Harvard University, said some companies began moving back to China as early as last year. He wrote in an email: “The key issue is that if you want reliable manufacturing, China is often the best place to do it.”</p
