Jul 15, 2019 / 15:19

Nike supplier look beyond Vietnam for risk diversification

The Hanoitimes - Firms are realizing that no nation is tariff-proof enough to serve as a global supply hub.

Taiwan-based Eclat Textile, sportswear supplier to Nike and Lululemon Athletica, said it plans to move beyond Vietnam to diversify risks amid the US – China trade war, Bloomberg reported. 
Illustrative photo.
Illustrative photo.
“Clients also want us to diversify risks and don’t want production bases to be in one country. Now 50% of our garments are made in Vietnam, so we are not diversified enough,” Chairman Hung Cheng-hai was quoted by Bloomberg as saying. 

Hung added the most important thing now is diversification, particularly in the current context of global situation. 

Eclat exited China in 2016 as conditions weren’t ideal for manufacturing, deciding instead to bulk up in Vietnam.

Heightened trade tensions between the US and China have disrupted global supply lines, forcing companies to pivot production out of the Asian nation and into other countries such as Taiwan, Vietnam and Bangladesh. 

But with Donald Trump hardening his stance on Vietnam and imposed higher duties on steel, firms are realizing that no nation is tariff-proof enough to serve as a global supply hub.

Eclat is now looking to set up multiple, smaller regional manufacturing hubs that can be nimble in servicing clients. The textile maker won’t consider adding plants or expanding in Vietnam in the next three years, Hung says.

The company instead will invest in new facilities in Southeast Asian nations such as Indonesia or Cambodia. It expects to invest US$80 million in setting up 120 production lines in the region, with the board deciding specific locations later this year, Hung says.

Although the US and China have resumed talks on a deal, there are growing signs that the global supply chain -- long reliant on China as the workshop to the world -- is being permanently transformed. Intel has said it’s reviewing its global supply chain, while Apple and Amazon are among those reportedly working on a Plan B.

But the rush to nearby Asian nations is also reaching a saturation point. “Vietnam, for example, is full, completely full,” Spencer Fung, chief executive officer of Li & Fung, the world’s largest supplier of consumer goods, told Bloomberg earlier this month.