Many international companies have slowly but surely started to shift their production to Vietnam for many reasons. How does that sound for your company? Knowing as much as possible about manufacturing in Vietnam is essential. Below, we’ll cover the most important things you need to know regarding this option.
Even compared to a developed manufacturing economy like China, you will find compelling reasons to consider Vietnam for your manufacturing needs. Vietnam has already started to see some significant growth. It has entered a new phase of success over the past couple of years due to the manufacturing shift.
Below, we will be looking at some reasons you might want to move your manufacturing to Vietnam and the things you will have to do to make it a reality. It is easier than you might think.
Why Move Manufacturing to Vietnam?
Although Vietnam is considered a developing nation, it has taken the manufacturing world by storm in the past few years. Yes, it’s still being developed, and the infrastructure is not what it is in certain other countries. However, it is far better than it once was, and many companies find it easier to get things set up in Vietnam. Some fantastic high-quality options are available and could also provide some cost advantages.
The country specializes in many different types of manufacturing, and they could be a good solution for your needs. Some of the specialties include:
- Apparel
- Luggage
- Furniture
- Home textiles
- Wood products
- Packaging and printing
- Hair extensions
Potential for Green Practices
Since manufacturing is still at the stage where it is growing in Vietnam, you’ll find that in some cases, there are strict laws regarding this field. The government has laws, environmental regulations, and other protections in the manufacturing industry.
At this point, it can follow sustainable practices. In 2016, for example. The DBW factory was completed. This is a green factory located not far to the south of Ho Chi Minh City. It was the country’s first factory with solar panels capable of providing up to 20% of the energy required for operations. It also had air conditioning, which might not sound like much, but it was one of the only factories in the country to offer this.
While not all of the factories being developed in Vietnam are taking their green initiatives this seriously, it’s nice that at least a few are doing this. Incorporating the practice of sustainability now, as Vietnam is still growing in the manufacturing field, can help to guide things in the right direction later.
For those looking for a new factory and a partner in Vietnam for manufacturing, now could be the ideal time to find a spot. Look for those that already have sustainable practices or that are going to be pursuing green initiatives.
Production Capabilities
You will be happy to know that it’s possible to find a wide range of production capabilities in Vietnam. Because the industry is still growing, it is often possible to find manufacturers and facilities that can meet your requirements. This is true even if you have smaller order quantities than some other companies. If it was difficult to find a company to work with in China because their minimum requirements were so high, you might have more luck in Vietnam. If you have a smaller company, this could greatly benefit you.
Of course, you can also find the opposite. You can locate extensive facilities that can handle even your most oversized orders without a problem.
Good Quality
You will also discover that the quality of work you can expect through the manufacturing facilities in Vietnam is impressive. Although Vietnam may not have the population of China, they still have many workers who can take on many different roles in the facility. Many of the various manufacturing elements will be conducted in-house. This often means you can keep the quality control elements all in-house.
As the manufacturing industry grows in Vietnam, so does the level of skilled workers. You can find many workers in the country who are highly skilled in hand assembly work, and the workmanship standards tend to be high. Essentially, this boils down to the fact that you can get a high-quality production facility for your goods.
Cost of Production
Of course, one of the other elements you will always have to consider when manufacturing in Vietnam will be the cost. The amount you are paying the workers in the factory is one of the factors that will determine just how much it will cost you to manufacture in Vietnam. The higher the wages, the more effect it will have on you. Wages in China tend to be three to four times higher than in Vietnam.
So, what does this tell you about wages? If you want to lower your costs, Vietnam could be the place to manufacture. You still get good quality, but the cost of employee salaries tends to be much lower. You can potentially lower your unit price substantially, which means more sales for you and a more significant profit margin.
Growing Infrastructure
Vietnam is a growing country. There are many port facilities, highways, air traffic, and improved networks. While there are certainly still some areas of Vietnam that are rural and that aren’t fully connected, the infrastructure in the country has been improving by leaps and bounds in the past few decades. The government in Vietnam has been working to improve the infrastructure through private and foreign investment.
Access to Raw Materials
One of the other reasons Vietnam makes a good place for a manufacturing company is the proximity of raw materials. Rubber trees, for example, are all over the place in Vietnam, making the country one of the largest producers of natural rubber on the planet. It also has massive bauxite ore reserves, which are needed to produce aluminum. For this reason, Vietnam manufactures a lot of aluminum. This is something China needs to import.
Therefore, using rubber, aluminum, or other raw materials found in Vietnam for your products could reduce your costs. Some of the best options for manufacturing in Vietnam include printed circuit boards, electronically commutated motors, rubber products, aluminum, and plastic injection molding.
Increased Competition Is Always Good
Of course, one of the other good things about manufacturing in Vietnam is that it provides you with more choices. You can set up a manufacturing facility in Vietnam if you wish. There are also options for China and other countries. Having nations like Vietnam throw their hat into the manufacturing ring gives you more choices.
It also shows facilities in other countries that they will have to step up their game if they want to continue getting customers. More competition tends to be good for everyone.
Common Legal Entity Options and Requirements
Currently, two common legal entity options exist for starting a manufacturing company in Vietnam. You might want to set up a company as a joint stock company. While this has a more complex structure, it can benefit medium to large companies. For small companies that have between one and 50 employees, setting up a limited liability company is often the best solution. Of course, you will want to talk with a professional advisor before moving.
One of the questions many people ask is whether they can have 100% foreign ownership of a company in Vietnam. As a foreigner, you can own 100% of the manufacturing company. You don’t need to have part of the ownership be based in Vietnam. Additionally, you will not have to worry about any fixed minimum capital requirement to set up your manufacturing company.
Steps to Take When Moving Manufacturing to Vietnam
How long will it take you to move and get things set up in Vietnam? It will all depend on quite a few personal factors. For the most part, it should not take more than four or five months to get going.
CONSIDER WHAT ELEMENTS NEED TO BE RELOCATED
What parts of your manufacturing that you want to move to Vietnam? Where are you currently doing this manufacturing? Are you doing everything in China? The United States? Indonesia? It’s best to consider what you might want to move into manufacturing in Vietnam.
This could depend on a range of factors. For example, what will be cheaper to have manufactured in Vietnam? What about the supply chain? Will you be able to get what you need to the factory so that it can be made? Remember that there will not be a production shift when you start manufacturing in Vietnam, but there will also be a supply chain shift.
THE FACTORY
When determining how to set up and open your business, you must consider the size, type of factory, and location. Consider the type of manufacturing business you are running, the current scope of your company, and how you would like to grow in the coming years.
You have a few options when it comes to getting a facility. You could rent a facility, which is what many people do. These are prebuilt manufacturing facilities licensed by leasing companies in Vietnam. This option can work well for many different types of businesses and investors.
Another option is to rent land in a suitable industrial zone. You will need to think about the length and terms of the lease. You also have to consider the space you will need and the types of tools and equipment. It is also possible to rent land directly from the state. This option only tends to be suitable for long-term land leases and who want to spend a lot of time in the country manufacturing.
Consider the size and type of factory, as well as the location. You must ensure it is in the correct zone for what you want to manufacture.
INVESTMENT REGISTRATION CERTIFICATE
With some types of investment, companies need to be approved by the Vietnamese authorities before they can start to move ahead with manufacturing and starting or moving a business to Vietnam. It’s always better to start the process as early as possible to determine how long it might take. Working ahead is a good idea.
You will also need an investment registration certificate for your location and the investment project. This will have to come from the Vietnam Department of Planning and Investment. This will be required for any 100% foreign-owned investment projects. This process can take several months, so you want to get things squared away as quickly as possible.
To apply, you will need to fill out the application for implementing an investment project, a proposal of the investment project, and financial statements that show at least the last two years of the company’s operations.
You will then need to get your enterprise/business registration certificate, which can take several days, and contribute capital within 90 days upon the issuance of the business registration certificate. Depending on the manufacturing facility you are creating, you might also need other licenses. The extra permits could take up to 30 days to complete.
All projects that want to set up a new business in Vietnam need the enterprise registration certificate. When you receive the ERC, you will get a number that will double the tax registration number. For the ERC, you will need not just the application but also a copy of your company charter, a list of all board members, a list of legal representatives, and letters of appointment and authorization. For the ERC, it will usually take about three days from when the documents are submitted.
WHAT COMES NEXT?
You then need to take care of all the other elements of getting your business up and running. This will include opening bank accounts, labor registration, business license tax payments, charter capital contribution, and public announcement of company establishment.
One of the things to note about Vietnam is that there are no local, city, or provincial taxes. There are only national taxes. Your business will pay tax in the localities where they are headquartered or where they have registered branches. Typically, you will need to be aware of several types of taxes as a company operating in Vietnam. These include the business license tax, corporate income tax, value-added tax, special consumption tax, foreign contractor tax, and customs duties.
Get Some Help and Connect with a Good Company
You will find that even though it might seem like a lot of things could go wrong if you try to set up a manufacturing company in Vietnam, it’s easier than you might think. You will want to connect with a professional who can help walk you through the process of getting your company set up in Vietnam, though. All companies have different needs and goals, so you’ll want to ensure you have guidance along the way.
Of course, you also need to be sure you are working with a company you can trust when moving your manufacturing into Vietnam. There are a lot of ways that things can go wrong. Therefore, you want to vet any companies you are working with fully. Learn more about them and what they are bringing to the table. See whether they can provide you with all the necessary manufacturing and shipping services. Check the prices, the capabilities, etc., and then talk with them about getting you into Vietnam.
For many companies, bringing manufacturing to Vietnam is one of the best ways to reduce costs and potentially increase profit.
Is Vietnam Right for Everyone?
One of the other questions you will have to ask yourself is whether setting up your company to manufacture goods in Vietnam is the right choice for you or not. You will want to look into the pros and cons, talk with the experts, and see whether it’s a solution you might want to consider. Depending on the nature of your business and the size, it could be a good idea.
It’s still relatively early when it comes to manufacturing in Vietnam. There is plenty of time for you to get in on the benefits of manufacturing in Vietnam, so it could be the right time to get started and be interested in moving your project to Vietnam. Jaycon Systems has facilities in the United States, Vietnam, and China, catering to your production needs. Request a no-cost quote today!
