In recent years, many foreign companies have gradually moved their manufacturing operations from China to Southeast Asian countries. Among them, Vietnam is one of the most popular destinations, becoming the second largest supplier of clothing and footwear to the United States.
However, according to a report by CNN on the 2nd, due to the recent closure of a large number of factories in Vietnam due to the impact of the new crown epidemic, and shoppers The surge in demand has hit the supply chains of U.S. sellers of apparel and footwear, among others.
Camilo Lyon, an analyst at US financial services company BITG, said that sports brands such as Nike and Adidas are at the greatest risk of supply chain disruption because ” Vietnam has been a strong alternative to China’s manufacturing industry in recent years.”
Screenshot of CNN report Although Nike claimed that consumer demand was strong, it was still at the end of September It lowered its full-year sales forecast. About three-quarters of Nike’s shoes are produced in Southeast Asian countries, with 51% made in Vietnam. However, as the COVID-19 epidemic in Vietnam continues to be severe, a large number of factories were forced to close from July to September, causing Nike to lose 10 weeks of production. Currently, half of Nike’s apparel factories in Vietnam have been closed, company executives said on a conference call. Nike expects factories in Vietnam to reopen in phases starting in October. But Matthew Friend, the company’s chief financial officer, said on a recent earnings call that even if construction restarts, it could take several months to reach full production. CNN reported that a recent surge in shopper demand, coupled with a shortage of shipping containers and port stagnation, has triggered a tightening of the supply of products ranging from cars to footwear in the United States. Among them, some large clothing and footwear sellers in the United States have been even more affected by the closure of factories in Vietnam.
Vietnamese workers are undergoing collective nucleic acid testing, picture from Vietnam News Agency
American Apparel and Footwear Association (AAFA) President and CEO Steve Lamar said: “Vietnam is a very large partner for the United States and is our second-largest source of apparel and footwear. The industry group said China is the largest supplier of apparel and footwear to the United States.
Leon, an analyst at U.S. financial services company BITG, said in a research report released last month that sports brands such as Nike and Adidas are facing supply chain disruptions. The risk is greatest because “Vietnam has been a strong substitute for Chinese manufacturing in recent years.”
He said that other brands with large production operations in Vietnam, such as UGG, Coach, Michael Kors, PacSun, etc., will also be affected.
Lyon estimates that it may take 5 to 6 months for factories in Vietnam to resume normal operations after the blockade ends. In addition, U.S. sellers will also face staffing issues. He said: “After the blockade, Vietnamese factories may also have difficulty getting workers back to work.”
Supplies to the American sports brand Under Armor The chain is also affected, with one-third of the company’s clothing and footwear production made in Vietnam. Under Armor CEO Patrik Frisk said on an earnings call in August that the company was closely monitoring the impact of local factory closures on its supply chain, calling it an “evolving situation.”
Due to the rampant delta mutant virus, the number of new crown cases in Vietnam has remained high since late May. In July this year, the Vietnamese government implemented strict epidemic prevention measures and temporarily closed a large number of factories. Subsequently, the production of footwear, clothing and other products came to a standstill.
At the same time, the epidemic has dealt a heavy blow to Vietnam’s economy. According to data released by the General Bureau of Statistics of Vietnam in late September, Vietnam’s gross domestic product (GDP) fell by 6.17% year-on-year in the third quarter, the first quarterly decline since 2000. In the same period last year, economic growth data was 2.69%.
On September 16, the American business news website Quartz Finance published an article entitled “Vietnam’s COVID-19 outbreak is driving manufacturing back to China.” It is said that Vietnam’s strict epidemic control over the past three months has made many American business executives worry that their companies may lose production capacity, and some companies have begun to promote the relocation of production capacity to China.
Roger Rawlins, CEO of the American shoe brand Designer Brands, commented: “Think about how much effort everyone has put into moving out of China. And now China has become one of the few places where you can get goods. Everyone seems to be on a roller coaster.”
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