We have been making trips to Vietnam to explore the manufacturing environment south of the border. We have had the pleasure to make connections in Hanoi and Saigon and expand our team in-country. Below are thoughts on starting to do business in Vietnam.
Let’s start here. I had heard that prices in Vietnam were low, even lower than those in China. But never had any real info to back that up. Now with our first projects in Vietnam, we’re starting to get that data. Here are per piece quotes on the same die cast aluminum part, quantity 100,000 pieces:
With USA tooling costs at $40,000 and Vietnam tooling costs at $4000.
The prices really are that good. A rule of thumb I heard was 40% savings over China – at least here, that more than holds.
So. Many. Machines.
Where does a still useful tool go when its original owners in Japan/Korea/Taiwan/USA/Germany want to upgrade? Vietnam. Along route 1A in Saigon there are literally miles of shops selling second hand tools. CNC and manual milling machines, injection molding machines, sheet metal, stamping, and punching equipment, forklifts – whatever you want, at a fraction of its original price. Along with a $250/month average factory worker wage, we can start to understand how Vietnamese industrial services are so cheap.
Asian Connections + Imports
Looking at the names on the tall buildings of Hanoi and Saigon, it becomes clear that there is a strong connection between the Vietnamese economy and that of other East Asian nations. Many of the investors in Vietnamese businesses are Japanese and Korean – many Vietnamese students learn these languages in hopes of securing roles with these firms. Similarly, many of the factories we have visited are preparing exports to Taiwan or Japan, often using components or tools originally produced in one of these countries.
With this strong connection to the other countries of East and Southeast Asia, along with simply being a smaller country, imports play a large role in Vietnamese manufacturing. It is seemingly easier to import products and reclaim tariffs on export than in China. Vietnam also has free trade deals with China and the other countries of Southeast Asia. This is certainly of interest to us as we start planning more complex projects in Vietnam.
More Space, Smaller Organizations
In China, it’s rare to find a manufacturing organization with fewer than 100 people. In Vietnam, 10 to 20 seems to be more normal. These smaller teams though operate in much larger spaces – buildings the size of airplane hangers with only a handful of employees. To me this signals a different approach to managing overhead, where both the total population is lower and land is more available.
Time in Vietnam has made me really appreciate Alibaba, and the capacity for easy global trade that has built around the platform. Most Vietnamese factories aren’t listed there – and with supposed $10,000/month fees for a Vietnamese firm to list on Alibaba, many likely never will. This makes Vietnamese factories much harder to find digitally. Also, where a Chinese factory might have a sales team responsible for checking and responding to messages and facilitating orders, Vietnamese factories often only have the boss’s cell phone number. For these reasons, it has been key for us to expand our team to Vietnam. Our new friends have been so helpful in terms of finding factories and communicating daily in Vietnamese, to make sure our projects proceed smoothly.
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