Trend of Moving Production from China to Vietnam Heats Up

Nhat Trung

09:56 09/07/2019

BizLIVE -

The receiving countries prefer the high tech companies to upscale the production chains. This explains why some textile companies complain that they have found it hard to find the land and necessary labor force in Vietnam.

Trend of Moving Production from China to Vietnam Heats Up
Recently, there is an emerging trend in which many FDI companies move partly or all of their production to from China to Vietnam to produce US-oriented products so that they can avoid the high taxes that US applies to imported Chinese goods.
In this trend, the receiving countries prefer the high tech companies to upscale the production chains. This explains why some textile companies complain that they have found it hard to find the land and necessary labor force in Vietnam. Some of textile company manages even think that the golden time to invest in Vietnam is over.
Nintendo is not an exception. Nikkei yesterday reported that Nintendo lately set up a plan to move part of the prodution of Switch console to Vietnam from China as the Washington-Beijing trade war threatens to cast a shadow over the hit gaming device.
Currently, almost all Switches are manufactured in China by contract manufacturers including Hon Hai Precision Industry, also known as Foxconn. Their Vietnamese facilities will take over part of that work possibly within a few months.
About 40% of the nearly 17 million Switch consoles sold in fiscal 2018 were sold in the Americas -- chiefly in the U.S., Nintendo's biggest market by sales. The company has been hunting for ways to dodge the risk of tariffs, which it senses would result in a severe blow to both its operations and customers.
Nintendo plans to keep its fiscal 2019 target for global Switch sales at 18 million units, so an increase in Vietnamese production will likely bring a corresponding decrease in China relative to initial plans.
The Switch retails in the U.S. for around $300. But that price tag would shoot up by dozens of dollars if Nintendo were to pass on to consumers most or all of the burden from the 25% tariffs being threatened by Washington. The console presently faces no import duties in the U.S.

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