How many furniture companies are exporting through Vietnam?
Enterprises borrowed Vietnamese exports
On the evening of November 8, Yongyi shares announced that the company will build an office furniture production base in Vietnam. On the evening of November 23, Meikemeijia announced that it plans to increase capital for three companies located in Vietnam. In addition, furniture companies such as Minhua and Henglin have also established factories in Vietnam.
The coincidence of big companies has made more companies realize that building a factory in Vietnam may be another major trend.
However, in the face of growing Sino-US trade relations, the transfer of furniture factories to Vietnam may not be just a reason for cost reduction.
Which companies have set up factories in Vietnam?
Despite the decreasing advantages of building a factory in Vietnam, Vietnam has become the next destination for many furniture factories.
As early as 2013, A Home Furnished to set up a 450-mu raw material production base in Vietnam to participate in the global home industry chain competition. Since then, furniture companies have traveled to Vietnam.
This phenomenon has occurred in this year’s blowout: In June 2018, Man Wah Holdings acquired a Vietnamese company engaged in the production and sale of sofas for US$68 million. The Target Group is mainly engaged in the production and sale of sofas and exports to overseas markets. The commencement ceremony of the construction of the new plant project was carried out on October 9. It is expected that the plant will start production in the fourth quarter of 2019.
On November 8, Yongyi Co., Ltd. announced that it plans to invest 9.5 million US dollars to build an office furniture production base in Vietnam. The announcement stated that the move was in response to the “One Belt, One Road” policy, accelerating the globalization of the market while effectively avoiding trade barriers.
On the 23rd of the same month, Meike Home announced that it plans to increase the capital of three companies located in Vietnam, with a transaction amount of about 181 million yuan. According to the announcement, this move is to improve the global allocation of the supply chain, optimize the production capacity, and make Southeast Asia the main source of supply for the North American market.
On the evening of the 26th of the same month, Henglin announced that it plans to set up a wholly-owned subsidiary in Vietnam for US$48 million to build a Vietnamese office and civilian furniture manufacturing base. The announcement stated that it is in line with the strategic direction of “One Belt, One Road” and is conducive to avoiding trade friction risks and fully exploiting the international market.
Why do you have to travel thousands of miles to Vietnam?
Why do furniture companies choose to build factories in Vietnam? The advantages are obvious:
The first is the cost of employment in Vietnam. Although Vietnam’s wages have increased significantly in recent years, according to a report in Vietnam in July, the average monthly wage of Vietnamese workers was 240 US dollars in the first half of 2018, equivalent to less than RMB 1,700, even lower than many domestic provinces and cities. Minimum wage line.
Other costs are also relatively cheaper than domestic: Vietnam’s industrial electricity consumption is about 0.45 yuan / kWh, half of the domestic. The cost of industrial land purchase is also relatively low.
From a policy perspective, the domestic “One Belt, One Road” policy has laid a broad road for enterprises to set up factories in Vietnam. Vietnam has also been promising policies for foreign-invested enterprises. Foreign-invested in Vietnam can enjoy the “two exemptions and four reductions” tax concessions. The first two years are exempt from corporate income tax, and the latter four years are halved.
In the face of domestic labor shortages, difficulty in recruiting workers, rising recruitment costs, environmental pressures, rents and other headaches, it is indeed a good plan to transfer to Vietnam.
For foreign trade enterprises and furniture companies with a relatively large export volume, going to Vietnam has a more important significance.
Sino-US trade friction has made many furniture companies very difficult. In 2017, China exported 1.36 billion US dollars of wood furniture, of which 5.288 billion were exported to the United States. Taking foreign trade enterprises as an example, the data shows that the net profit of many foreign trade enterprises has declined this year. For example, Henglin shares have a net profit of 0.57 billion yuan in the first half of the year, a negative growth of 45.47%. More corporate net profit is negative.
The trade friction also directly affects the layout of some furniture companies in the international market.
By borrowing from Vietnam, enterprises can reduce costs on the one hand and rationally avoid the risk of trade friction on the other hand. At present, Vietnam has signed 12 free trade agreements, and the free trade agreement with the EU is expected to enter into force in 2019. This means that Vietnam will become a stepping stone for many furniture companies to open up the international market.
Will Vietnam be the ultimate destination?
Of course, Vietnam is not the best and last choice.
In 2017, the Vietnamese media issued a document on the transfer of Vietnamese furniture companies to Vietnam, warning Vietnamese furniture manufacturers. In the future, it is unclear whether Vietnam will face a large number of furniture companies that are pouring in from China.
And will furniture companies use the Vietnamese exports to attract US attention? The answer is also unknown. There is a foresight: In May 2018, the number of Vietnamese exports of steel products to the United States surged, which triggered the attention of the United States. After investigation, the US Department of Commerce decided to impose high tariffs on steel products imported from Vietnam and originating in China. The same crisis will also fall on furniture companies.
In addition, there are also business owners who are struggling with the work concept of Vietnamese workers and domestic dissatisfaction. Many companies give higher wages than Vietnam’s average wages, and it is difficult to recruit satisfied employees.
There is always talk about whether to go to Vietnam to build a factory. Some people think that this is the best choice for the current enterprises to avoid disadvantages, and some people think that one day the preferential benefits will disappear. Where should the company go then?
Because of rent, environmental protection, urban construction and other reasons, in the past decade, the furniture factory has to run farther and farther, staged a factory relocation drama that hopes and disappoints. For them, no matter where the factory is located, it is “still on the road”.
Where is the future?
Perhaps, for many furniture business owners, it is most important to have a good winter.