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Vietnam Garment Manufacturing 2024: Quick Guide

Vietnam garment manufacturing has come a long way in not so many years. In 2022, Vietnam took fourth place in terms of world market share of garment exports, sending nearly US$37.6 billion worth of garments and textiles all over the world. This was up from US$26 billion in 2017, according to Vietnam’s General Department of Customs data.

This rapid ascent up the garment manufacturing leaderboard has in large part been due to Vietnam’s low wages, which are about a third of what they are in the traditional garment and manufacturing hub that is China. 

Furthermore, Vietnam’s neighbour to the north has been embroiled in a  number of trade conflicts, particularly with the US, which has made the business environment broadly, somewhat more challenging for foreign brands.

But what has really been pivotal to Vietnam’s rise as a garment and textile manufacturing powerhouse, has been its geographical location. With many of the raw materials, fibres, and threads needed to manufacture clothing manufactured in China, its shared border with the world’s second biggest economy has worked to the advantage of Vietnam’s garment and textile makers.

That said, eschewing permanent investments in favour of contract manufacturing arrangements, any brands have put a lot of the risk on local manufacturers. As such, in recent years as the world economy has struggled, and as orders have dried up, these factories have been forced to cut staff or in some cases cease production altogether.

That is not to say there is no value to be found in manufacturing garments and textiles in Vietnam. On the contrary, recent challenges may work in favour of foreign firms. Making the most of this opportunity, however, requires a clear understanding of the fundamentals of Vietnam garment manufacturing and how the industry is structured and shaped. These nuances of Vietnam garment manufacturing, are outlined herein.

Contract manufacturing in Vietnam

Starting a garment factory from scratch is always an option for firms looking to capitalise on Vietnam’s low manufacturing costs. However, most firms looking to manufacture garments in Vietnam choose to go the contract manufacturing route.

Contract manufacturing in Vietnam is essentially outsourcing production to a local firm. Vietnam’s rise as a garment and manufacturing hub has seen a multitude of these agreements made and implemented effectively–Nike and Adidas, for example, both engage in contract manufacturing in Vietnam.

Notably, these agreements do in some ways limit the control a foreign firm has over their product. However, depending on the size of the order and the longevity of the partnership most of the finer details can be negotiated. For example, where the raw materials come from and what standards the end product should meet.

That said, building a garment manufacturing enterprise in Vietnam from the ground up is another option. Firms looking to go the whole-hog should see: Manufacturing in Vietnam 2024: Ultimate Guide

Garment manufacturing hubs in Vietnam

Garments and textiles are made all over Vietnam, however, the biggest concentration of garment and textile makers is in Vietnam’s south. Specifically, Ho Chi Minh City and the neighbouring provinces of Binh Duong and Dong Nai.

Ho Chi Minh City

Ho Chi Minh City rose very quickly to become a key garment manufacturing hub. Its huge population alongside those of its neighbouring provinces have provided an abundance of low cost labour. Furthermore, its proximity to the coast, and the presence of what was once Vietnam’s biggest port, has also made importing raw materials and exporting finished garments relatively easy. 

Binh Duong

Next door to Ho Chi Minh City is the province of Binh Duong. Like Ho Chi Minh City it has an abundance of low-cost labour and relatively easy port access. This province has invested heavily in the kind of manufacturing infrastructure manufacturers broadly need as well as provided Vietnam garment manufacturers extensive support establishing their operations.

Dong Nai

To the north of HCMC is Dong Nai. Dong Nai is also popular among garment and textile manufacturers. Among the big names that have set up shop in Dong Nai is the self-proclaimed biggest shoe maker in the world, Taiwan’s Pou Chen. 

See also: Vietnam Clothing Suppliers: Quick Guide 2024

Tariffs, free trade agreements, exports

Garment and textile exports come under HS code 61 – Articles of apparel and clothing accessories, knitted or crocheted. These can attract import tariffs in some jurisdictions and these tariffs can be different depending on the type of product or the material it is made out of. As such the table below is a very broad overview only.

(Note that an overview of footwear tariffs can be found here: Vietnam Footwear Manufacturers: Quick Guide 2024)

Import tariffs, HS Code: 610120 apparel made of cotton, current as of 2021

Free Trade AgreementUp to (%)
Most Favoured Nation Tariff20
ASEAN Free Trade Area0
ASEAN-Australia-New Zealand0
ASEAN-China0
ASEAN-Hong Kong12
ASEAN-India8
ASEAN-Japan FTA3
ASEAN-Korea0
CPTPP0
EU-Vietnam*13.3
Vietnam-Japan0
Vietnam-Chile5
Vietnam-Korea0
Vietnam-Eurasian Economic Union0

Source: World Trade Organization Tariff Line Duties

Key garment and textile export markets, 2022

DestinationValue US$
United States of America17,359,654,958
Japan4,072,768,217
Republic of Korea3,309,446,324
Canada1,311,234,139
China1,200,981,253
Germany1,067,313,569
Netherlands1,032,197,613
Cambodia876,337,017
United Kingdom803,990,213
France658,049,227

Source: Vietnam General Department of Customs

Sustainability

Sustainability has become much more than just a buzzword in garment and textile manufacturing in Vietnam in recent years. With circular textile policies in key markets like the EU and US, domestic garment manufacturers have been forced to up their sustainability game. 

The response, however, has been mixed.

Whereas some firms have been quick to invest in more sustainable operations including environmentally friendly equipment and waste management, some firms have not. Of note, this is coming down the crunch with many of these new policies set to kick-in in 2024.

In this light, firms looking to engage a garment manufacturer in Vietnam, should make sure to verify their sustainability credentials and the progress made toward meeting these requirements. 

In the absence of sustainability credentials, firms looking to establish a long-standing relationship should make sure there is a clear roadmap and financing plan in place–notably in 2023, as orders subsided on the back of broader global economic challenges many firms burned through their savings and sold off assets to stay afloat. In this context, firms may not have the funds necessary to meet sustainability standards.

Current challenges

The year 2023 was not a good year for garment manufacturers in Vietnam. This was mostly on the back of lower demand in key export markets as a result of higher inflation from higher fuel costs. The response to this in Vietnam has been mostly supply side stimulus. Tax and interest rate cuts have been common but the impact of these measures has been limited without the demand to support them.

By the end of November 2023 exports of garments and textiles from Vietnam were hovering at US$30.4 billion, a drop of 12.3 percent over the same period in 2022.

This decline has also seen a reduction in the garment manufacturing workforce with a number of big layoffs around the country. In fact, in the first six months of the year an estimated 70,000 workers in the garment and textile industry were laid off.

Though local manufacturers and industry bodies are optimistic about 2024, the reality is that it is mostly external forces that have created the current downturn. Higher inflation on the back of higher oil prices has taken its toll on consumer spending in developed markets in the EU and US and until this is resolved, manufacturing hubs like Vietnam will likely continue to struggle.

Again, foreign brands should confirm that a local manufacturer is financially sound and capable of fulfilling an order before it is placed.

Foreign brands manufacturing garments in Vietnam

Nike

One of the world’s leading sportswear brands, Nike has been making clothing and apparel in Vietnam for over a decade. As of November 2023, there were 120 factories in Vietnam making Nike products. Most of these were concentrated in southern Vietnam though there were still a number of factories scattered up and down the country. These factories employed some 474,485 workers.

Adidas

Adidas has had a presence in Vietnam for years and as of 2023 had 52 suppliers employing some 171,390 employees. Like Nike, most factories producing goods for Adidas are located in and around Ho Chi Minh City though there were several factories located in northern Vietnam as well. 

Of note, in 2022, Vietnam was the second biggest manufacturer of Adidas apparel accounting for 17 percent. This was up from 15 percent in 2021.

What’s next?

Reduced demand for garments and textiles in 2023 has created some challenges for Vietnam’s garment and textile manufacturers. Furthermore sustainability in key export markets may create barriers for foreign firms engaging contract manufacturers in Vietnam. That said, Vietnam is still a popular choice for big name brands and the reduced workload may in fact provide new firms the space to start to build and grow their own presence.

Key decision makers looking for support with garment manufacturing in Vietnam can contact any number of market entry consultants. Keeping up with ongoing developments in Vietnam’s garment manufacturing industry, however, is best achieved by subscribing to the-shiv.

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