Vietnam Update

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The record surge of Covid-19 infections forced factories in southern Vietnam to close, hit one of the world’s busiest clothing and footwear manufacturing centers, and prompted global brands to find alternate suppliers.

The supply chain disruption is a blow to a country that has basically controlled the local spread of the virus in 2020. Vietnam was one of the few Asian economies that grew despite the pandemic last year and attracted new foreign investment.

The number of new cases per day in Vietnam has been between 7,000 and 8,000. Since the beginning of July, almost all infections exceeding 200,000 in the country have been recorded.

Ho Chi Minh City, Vietnam’s largest city, has been hit hardest. It implemented strict social distancing measures on July 9, including regulations on workers’ transportation and housing, and the deployment of employees on the factory floor.

Two major footwear suppliers-Taiwan’s Baocheng, which produces shoes for Adidas and Nike, and South Korea’s Changxin, which also supplies the American company, suspended operations last month.

Pou Chen stopped production at the country’s largest factory in Ho Chi Minh City on July 14 and said that the factory will be closed until at least August 9. The company’s other Vietnamese factories were forced to scale down operations.

“The requirements of the local government have affected the ability of workers to go to work, which has led to a decline in capacity utilization,” the company said.

Pou Chen shipped 244 million pairs of shoes last year, 44% of which came from Vietnam.Adidas warned last week that supply chain restrictions may pay a price Sales of up to 500 million euros By the end of this year.

Another Taiwanese sports shoe manufacturer, Winterthur, closed several factories last month. According to its website, the company’s shoes account for one-sixth of Nike’s annual sales.

The Vietnam Textile and Apparel Association recently stated that more than 30% of garment and textile factories in the country have been closed.A sort of Report The state-run Vietnam News quoted the chairman of the association as saying that the vaccination rate for workers in the industry is “still very low.”

After the government’s delay in purchasing vaccines, Vietnam has been hampered by the stuttering vaccine program.only About 1% The country’s approximately 98 million people have been fully vaccinated.

Coronavirus cases have been reported across Vietnam and disrupted other industries including electronics.

Vu Ngoc Khiem of Global Sources, an e-commerce platform connecting Asia, said: “As all provinces in Vietnam have been hit by the new crown pneumonia epidemic, the situation is unprecedentedly uncertain, so that buyers must adopt plan B or C, including outsourcing production to another. One country.” Suppliers with overseas buyers.

Samsung is one of the largest employers in Vietnam, Be disturbed After a key supplier of injection molding equipment ceased operations, its smartphone manufacturing business has been in recent months.

The problem has been resolved, but the technology group’s electrical plant near Ho Chi Minh City has only about half the capacity. The company said it expects to “normalize” operations this month.

The consulting firm Eurasia Group stated in a research report last week that there are concerns that the epidemic in Vietnam “may damage production before the end of the year/holiday peak demand”.

However, health officials have said in recent days that the Covid cases in Ho Chi Minh City are “levelling out”, which may indicate that the current wave of the most serious infections has passed.

As the Sino-US trade tension worsens, Vietnam has attracted new investment and supply contracts from global electronics, apparel and other companies seeking to move their operations from China, the main manufacturing hub in Asia.

Additional report by Edward White and Song Jung-a in Seoul