Contract manufacturer: Vietnam can not replace China

Since the beginning of the trade war with China, US companies are trying to relocate their contract manufacturing to Vietnam. However, according to a Wall Street Journal report, it will take many more years for the Southeast Asian country to replace China as a manufacturing base, if at all.

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  1. Hessian Ministry of Finance, Frankfurt am Main
  2. A. Menarini Research & Business Service GmbH, Berlin

The specialized supply chains, which have made China the most important contract manufacturing location for smartphones, computers and notebooks, are nowhere near as advanced in Vietnam as finding factories with US security certifications and capital-intensive machines not easy, the report said. Workers are already running short.

BW Industrial Development, supported by US private equity firm Warburg Pincus, began construction of contract manufacturing facilities in Vietnam last year. The facilities are already fully booked until December.

Based in Ho Chi Minh City, Seditex, which brings together foreign companies with local factories, receives 20 inquiries a week from foreign companies. Founder Frank Vossen told The Wall Street Journal that companies that are used to operating in China are having trouble adjusting. "In Vietnam, there is no ready-made solution, that's the reality check."

The Japanese company Canon started in 2012 with the production of printers in Vietnam. However, only 20 out of the company's 175 suppliers in the Asian country are local companies, senior manager Dao Thi Thu Huyen told The Wall Street Journal. They mostly made plastic parts and packaging. Almost all electronic components came from Japan, China and Taiwan.

Taiwan-based Foxconn is a contract manufacturer for Apple, Huawei, Amazon, Cisco, Dell, Hewlett-Packard, Intel, Microsoft, Nintendo, Sony and others. Foxconn operates its factories mainly in China.