Vietnam garment manufacturing has come a long way in not so many years. In 2023, Vietnam took third place in terms of world market share of garment exports, sending nearly US$33 billion worth of garments and textiles all over the world, according to Vietnam’s General Department of Customs data. This was a decline from US$37.6 billion in 2022 on the back of broader global economic challenges. It is still, however, significantly higher than the US$26 billion Vietnam clocked in 2017.
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.
Contract manufacturing in Vietnam
Starting a garment factory in Vietnam 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.
Box 1: Chinese textile firm starts work on US$71 million factory in Vietnam
BP Textile Vietnam, a subsidiary of Chinese textile firm Black Peony, kicked off construction of a US$71.1 million factory in the northern coastal province of Quang Ninh, in July, 2024. Black Peony was founded in 1940 in China. This firm focuses on denim fabric, yarn-dyed fabrics and garment manufacturing. It has worked with a number of big name brands including Calvin Klein, Levi’s and GAP. Read more…
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 and clothing suppliers. 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: 10 Key Manufacturing Hubs in Vietnam 2024: Overview
Vietnam garment and textile exports
Vietnam is among the biggest garment and textile exporters in the world. After a rocky 2023, exports in the sector have picked up in the first seven months of 2024.
Key garment and textile export markets, July 2024
| Destination | June | July | MoM | YTD |
| United States of America | 1,489,045,534 | 1,716,228,975 | 15.26% | 8,926,733,297 |
| Japan | 320,257,244 | 422,035,463 | 31.78% | 2,296,560,006 |
| South Korea | 183,782,360 | 277,127,557 | 50.79% | 1,632,051,268 |
| China | 112,174,491 | 156,885,357 | 39.86% | 705,115,400 |
| Canada | 121,772,898 | 120,129,425 | -1.35% | 688,132,192 |
| Netherlands | 124,991,991 | 120,842,233 | -3.32% | 686,182,191 |
| Cambodia | 69,203,064 | 76,306,940 | 10.27% | 495,849,556 |
| Russia | 61,726,503 | 60,305,827 | -2.30% | 458,907,438 |
| Germany | 87,483,663 | 75,232,206 | -14.00% | 438,878,211 |
| United Kingdom | 70,804,740 | 81,660,381 | 15.33% | 431,031,458 |
| Other | 517,913,839 | 608,949,578 | 17.58% | 3,514,893,483 |
| Total | 3,159,156,327 | 3,715,703,942 | 17.62% | 20,274,334,500 |
Source: Vietnam General Department of Customs
Sustainability in Vietnam garment manufacturing
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. Nevertheless, foreign firms should be aware of these key regulations.
Box 2: US, EU green manufacturing regulations pose a problem for Vietnam
Green textile and garment manufacturing regulations introduced in the US in 2023 created problems for about 80 percent of Vietnamese textile and garment exporters. Similar regulations in the EU, require garment and textile imports to meet ecological design criteria, which have seen 90 percent of Vietnamese garment and textile businesses unable to export to the EU, according to reports in state media at the end of 2023. Read more…
EU Strategy for Sustainable and Circular Textiles (EUSSCT)
The EUSSCT is a strategy that has been adopted by the European Union to reduce waste in the clothing and apparel sector. Through regulation on things like design and minimum recycled material requirement, the strategy aims to limit the volume of clothing going into landfill.
It also introduces Extended Producer Responsibility (ERP) to fashion items consumed in the EU. This means that any cost to the environment in Vietnam must be factored into the retail price of the item in the EU.
Brands using clothing suppliers in Vietnam and exporting products to the EU should ensure they are aware of their suppliers green credentials and aware of any additional costs they may incur related to ERP.
Furthermore, a number of jurisdictions are considering introducing similar requirements amid a rising trend to reducing waste. With this in mind, foreign buyers may want to ensure that their Vietnam clothing supplier or suppliers have a roadmap for a transition to greening their operations if they have not done so already.
Corporate Sustainability Reporting Directive
The EU’s Corporate Sustainability Reporting Directive (CSRD) mandates that large firms and firms that are listed on EU stock exchanges need to produce ESG supply chain reports. These reports must outline any environmental or social risks that a firm may face in its supply chain.
Uyghur Forced Labor Protection Act (UFLPA)
The UFLPA essentially bans imports into the USA that are linked to forced labour in China’s Xinjiang province. Of note, this piece of legislation assumes all imports from Xinjiang are made using forced labour unless the importer can prove otherwise.
Understanding this law is particularly important for brands looking to manufacture clothing in Vietnam in that a large portion of raw materials used in the production of clothing in Vietnam come from China. They have also been known to sometimes contain material from Xinjiang.
Of note, between October of last year and May of this year, US Customs stopped 950 shipments entering the US from Vietnam under the UFLPA valued at US$520 million. Of those 528 were released, 207 are still pending an outcome, and 215 were denied entry. Those denied shipments were worth a collective US$20.9 million with 46 shipments of apparel, footwear, and textiles among them valued at US$496,485.
Current challenges in Vietnam garment manufacturing
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 saw 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.
That said, the situation for garment and textile manufacturers in Vietnam in 2024 looks to be turning around. Total exports of textiles and garments at the end of July were sitting at almost US$20.3 billion. This represents an increase of 6.9 percent over the first seven months of last year.
That said, foreign brands should still confirm that a local manufacturer is financially sound and capable of fulfilling an order before it is placed.
Box 3: Adidas, New Balance suppliers struggle to find workers in southern Vietnam
Vietnam Samho, which makes shoes for big international brands like Adidas and New Balance, was reportedly struggling to find factory workers for its southern Vietnam factory, it was reported back in June. At the time it needed about 1,500 workers but had only managed to recruit about 300 in the last two months. This is endemic of broader challenges recruiting factory workers in Vietnam. Read more…
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. The company engages around 159 factories all over Vietnam to produce shoes, apparel, and equipment. Most of these were concentrated in southern Vietnam though there were still a number of factories scattered up and down the country. These factories employ around half a million 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 2023, Vietnam was the biggest manufacturer of Adidas apparel accounting for 38 percent of Adidas’ total volume. This was up from 22 percent in 2022.
What’s next?
Reduced demand for garments and textiles in 2023 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 situation has notably turned around in recent months.In this light, key decision makers considering garment manufacturing in Vietnam should make sure to keep up with ongoing developments in Vietnam’s garment manufacturing industry by subscribing to the-shiv.
Last updated
- June 24, 2024: Under ‘Sustainability’ added: EU Strategy for Sustainable and Circular Textiles (EUSSCT), Corporate Sustainability Reporting Directive, and Uyghur Forced Labor Protection Act (UFLPA).
- August 16, 2024: Broad updates of data, added garment and textile exports, added boxes 1,2, and 3.