The epidemic in Vietnam is heating up, and the city closure measures have severely impacted the production and delivery pace of the textile industry. Industry players pointed out that the peak season of ready-made garments was disrupted by the epidemic. Fortunately, brand customers did not cancel orders, but postponed shipments. The industry could only wait for the lockdown to be lifted, and respond by outsourcing production and working overtime.
According to World Trade Organization (WTO) statistics, China’s garment exports last year were US$142 billion, ranking first in the world; Vietnam’s garment exports last year reached US$29 billion. , surpassing Bangladesh, has become the world’s second largest garment exporter, accounting for about 6.4% of global garment exports.
Due to its good control of the COVID-19 epidemic last year, Vietnam won the reputation of “model student in epidemic prevention”; however, a new wave of epidemics broke out in Vietnam in the second quarter of this year, and the Delta virus The epidemic is coming fiercely and has not slowed down so far. More than 240,000 people have been diagnosed in the past three months.
In response to the development of the epidemic, the Vietnamese government has implemented lockdown measures in many places. Taiwanese businessmen are also required to implement the “three local policies”, including local production of employees, local Meals and accommodation are required, and work can only be resumed after inspection. However, it is difficult to manage tens of thousands of employees in the factory. If one person is diagnosed, it may lead to a cluster outbreak in the entire factory, so many businesses have temporarily suspended operations.
The second half of each year is usually the peak season for exports of the garment industry. In addition, after the lockdown in Europe and the United States was lifted this year, retaliatory consumer buying came out, which drove the garment industry to be full of orders. This should have We were eager to see business opportunities after the lockdown was lifted, but the black swan of the Vietnam epidemic hit, severely impacting supply chain production and delivery.
Garment industry analysts analyze that it is difficult to move orders to other domestic production lines. First of all, if the purchased raw materials are transferred to other regions, import tariffs may be levied again, and the industry will be skinned again; secondly, under the US-China trade war, many multinational companies have withdrawn their supply chains from China and Moving to Vietnam, which has signed free trade agreements with many countries, enjoys tariff preferences. If the order is moved to China, the tariff advantages will be lost.
Vietnam is an important production base for textile stock Wang Ruhong. Vietnam’s garment production capacity accounts for 80% of the total. In line with the local government’s epidemic prevention policy, its own factories have temporarily suspended operations; weaving Taiwan is the main production center, accounting for 70% of the total. Vietnam’s weaving production capacity is only about 30%, and most of them are automated production lines. Ru Hong believes that the impact on production will be limited. If we further observe the proportion of Ruhong’s production lines in Vietnam, South Vietnam accounts for about 52% and North Vietnam accounts for 48%.
If Vietnam’s lockdown measures are implemented until the end of August, Ruhong estimates that the revenue of cloth will be affected by about NT$130-150 million, and that of garments by about NT$100-120 million. billion, revenue in August will be affected.
Ruhong Chairman Hong Zhenhai said that it has reached an agreement with brand customers and most orders have been deferred. We are currently actively looking for OEMs. After the official announcement of the lifting of the lockdown, production will be outsourced. Ruhong’s outsourcing production capacity ratio will increase from 55% to 65%. Ruhong’s own factories will work overtime to rush production. Due to the shutdown of about one and a half months, It is expected to take three months to fill the production gap.
Ruhong was originally optimistic that this year’s operations would be “high quarterly”, but the epidemic in Vietnam disrupted production momentum, and the legal person estimated that the revenue in the third quarter of this year could only maintain the second quarter. level. Hong Zhenhai emphasized that the current order visibility has reached the first quarter of next year, and brand customers have a positive outlook. Ru Hong believes that the beginning of next year will be no worse than this year, and is even expected to be better.
Down jacket OEM Guangyue has factories in Vietnam, China, Jordan, Romania and other places, of which Vietnam’s production capacity is nearly 50%. Guangyue has cooperated with local epidemic prevention Policy, the current factory is almost completely shut down.
Guangyue general manager Wu Chaobi pointed out that the short-term impact will inevitably be affected, but “the order is only deferred, not cancelled”, and the technical threshold of Guangyue’s down jackets is high. It involves many patents and cannot be produced through outsourcing. We can only wait for Vietnam to unblock it, and then we will work overtime for production.
The third quarter of each year is the traditional peak season in Guangzhou, and the fourth quarter enters the off-season. Due to the postponement of orders this year, Wu Chaobi pointed out that he is optimistic about the fourth quarter of this year. The off-season is not bad, and the operating performance is expected to be the strongest fourth quarter in history.
Juyang, a garment factory, has factories in Cambodia, the Philippines, Lesotho, Vietnam and other places. Vietnam’s production capacity accounts for about 40% of the overall production capacity; however, Juyang’s factories in Vietnam are spread all over the country. North, Central and South Vietnam are mainly affected by the epidemic. Currently, only South Vietnam factories are temporarily suspended, affecting about 13% of production capacity.
The legal person believes that Juyang’s August revenue will still be affected by the epidemic shutdown, but the impact can be reduced through capacity scheduling support in each factory and overtime production; Juyang The shareholders’ meeting will be held on the 24th, and chairman Zhou Liping will further explain the local situation.
As Ho Chi Minh City has announced that it will strengthen its epidemic prevention and control plan, it will strive to control the epidemic before September 15, maintain production activities and avoid supply chain interruptions. Textile industry insiders said that factory shutdowns have had a great impact on Vietnam’s economy, and the dissatisfaction of grassroots people has been increasing recently. The local government also wants to fight for the economy and shows its determination to fight the epidemic. It is accelerating the speed of vaccination in various places. The industry also hopes to have a vaccine in early September. Gradually resume work to get the textile peak season back on track.