Category: China

Moving Production out of China: The Pros and Cons of Vietnam and Taiwan

Written by: Pro QC Quality Assurance Team

Choosing a new manufacturing location is never easy, especially if you’re used to working with a particular production unit. However, with the US-China Trade War in full swing, many are being forced to look at other options in order to decrease the loss on margins. It doesn’t have to be all negative though; we’re weighing out the pros and cons of two alternative countries, Vietnam and Taiwan.

Before you start though, we think this tip is helpful: remember to assess whether the new location you’re looking at has known expertise in manufacturing your product. And secondly, conducting a factory audit on a potential new supplier can help make sure you’re taking the right step.

Vietnam

Second quarter 2019 figures from the Vietnamese government have indicated the country’s manufacturing figures rose 9.14%, pushing GDP up to 6.71% year on year, as Vietnam indicates it’s been benefitting from the current US-China Trade War climate.

According to the IMF, in 2018 Vietnam’s strong economic growth was led by industrial activity. One of the reasons for this has been the government’s strong support of the private sector, which has helped strengthen the regulatory quality and boost the ease of doing business in the country.

Revamped anti-corruption laws in 2018 have also improved transparency – with a commitment to link databases on taxation, anti-money laundering, customs, and land transaction, on target for the end of 2019.

If you’re producing apparel, shoes, home-textiles or anything furniture-related, Vietnam’s a good bet.

But beyond this, one of the key advantages of Vietnam is its logistics chain – with solid infrastructure: roads, airports, and multiple ports of shipping, getting your goods on their way is much easier than ever before.

But this is also one of the challenges to consider – logistics is still more costly and less integrated in Vietnam than in China.

Further cons in Vietnam are a need to improve the enforcement of contracts and legal interpretation as well as facilitate resolution and bankruptcy proceedings.

Taiwan

The Economist has long hailed Taiwan as being the most technologically advanced computer microchip maker in the world, and with the world’s seventh-largest economy, there’s no need to look at the region’s GDP figures.

A tech-savvy hotspot, Taiwan has built up its reputation as a key player in manufacturing IT goods over the last 20 years. One of the advantages here is a highly skilled labour-force and top-notch R&D centres, which also offer design expertise that is often found lacking in other markets. All these pros inevitably make Taiwan a great option for higher quality – and largely tech – manufacturing needs.

Solid infrastructure and well-established shipping ports and logistics chains back Taiwan’s claims to fame here, but strong IP laws, backed by stable governmental regulation are also important factors in why it is such a hotspot.

This though leads into Taiwan’s biggest challenge: cost. All the stability Taiwan provides also means that you’ll be paying up to 30% more for manufacturing there versus in mainland China.

Remember that supplier identification research or an initial supplier audit can help determine if a location is right for your production needs.

Learn more about Pro QC’s quality assurance, engineering and consulting services at https://proqc.com.