Vietnam Manufacturers Facing Shortage of Chinese-Made Components: Contingency Plans

Posted by Written by Chris Devonshire-Ellis Reading Time: 2 minutes

China’s Coronavirus outbreak has impacted businesses throughout ASEAN being able to obtain supply deliveries. There are a number of issues Vietnamese businesses face with supplies from China at this present time:

When will my China supplier return to production?  

This varies on a national basis in China. Some factories began operations on 10th February. However, travel restrictions still in place can be expected to slow their initial ability to resume production by about 20-30 percent. This article explains what dates in which regions in China can be expected to resume operations: China Factory Reopening Schedules. However, logistics and shipping companies will also not return to full capacity operations for about another month. Delays will be inevitable.

Applying force majeure to China production contracts 

It may be necessary to invoke force majeure clauses with your China suppliers to protect both your business and theirs and to allow renegotiated terms or cancellation. This article explains the details: Coronavirus in China: Applicability Of Force Majeure.  

Looking at China alternative suppliers and manufacturing 

A longer-term strategy may be to reduce dependency on China and to look at replacing part or all of your China production elsewhere. Many foreign investors in China have moved part of their production facilities to Vietnam itself, for example. ASEAN, of course, has a Free Trade Agreement with China, as well as with India, in addition to Japan, South Korea, Australia, and New Zealand.  

The Da Nang option

That means both expanding your existing Vietnam manufacturing base could be a suitable alternative, as could perhaps taking advantage of other ASEAN locations, in addition to India, which has an additional attraction in being a low-cost manufacturing base as well as possessing a significant domestic consumer market.  Da Nang in Vietnam, for example, is now taking up a lot of over-spill from Ho Chi Miny City as free trade and economic zones in southern Vietnam become full to capacity. Expanding operations to include a Da Nang facility may make a lot of sense. It is a manufacturing location we covered in some detail in this complimentary magazine download here.

Buying an existing Vietnamese facility 

Another quick route could be through acquiring another, existing facility in Vietnam. That’s an option we discussed in our recent complimentary issue of Vietnam Briefing magazine, Mergers & Acquisitions in Vietnam.

Other ASEAN alternatives, and India 

The article Relocating Your China Sourcing And Manufacturing To Asia: Procedures & Choices contains a great deal of content, including about ASEAN import-export procedures, establishing a business in Indonesia, Philippines, Singapore, Thailand, & India, and also has links to numerous complimentary downloads.

Our firm has 12 offices in China, three in India and another 12 across ASEAN – including three in Vietnam. We can provide assistance throughout the region. Vietnam based foreign investors looking for assistance or news about the situation in China, or looking to expand their businesses in Vietnam or elsewhere in Asia may contact us at vietnam@dezshira.com

About Us

Vietnam Briefing is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in Hanoi and Ho Chi Minh City. Readers may write to vietnam@dezshira.com for more support on doing business in Vietnam.