The ongoing trade war between the United States and China has led to several big-name fashion brands such as Uniqlo, Tommy Hilfiger and Calvin Klein to shift their production factories out of China. Most of these brands are turning to Southeast Asian countries to avoid higher manufacturing costs.
As it turns out, fashion brands now need to pay close attention to current trends as well as politics, thanks to Donald Trump’s trade war against China. On October 1, The United States President took another swipe at the country when he increased existing tariffs on US$250 billion worth of Chinese goods from 25% to 30%.
Since the start of Trump’s presidency, popular brands such as Uniqlo, Calvin Klein and Tommy Hilfiger have moved their manufacturing base out of China. The rising labour costs over there has also caused the apparel industry to look elsewhere for alternatives. For example, Fast Retailing, an operator of clothing chain Uniqlo, is relying more on Southeast Asian clothing factories as wages increased in China.
As a result, major Uniqlo suppliers in Vietnam have increased by about 40%, over the past couple of years. Workers are highly skilled and although wages are relatively high for the region (at US$216 a month), they are less than half that of China. Other plus points include proper infrastructure and affordable electricity, thanks to government subsidies.
Southeast Asian clothing factories for international fashion brands.
“Vietnam is excellent in terms of high-value goods and is definitely a market that would benefit from a trade war between the US and China,” said Sean Coxall, the president of solutions at Hong Kong-based supply chain manager Li & Fung. Coxall added that Vietnam’s all-round appeal has led to the country being one of the biggest suppliers of footwear in the region, with Uniqlo as the main driving force behind this.
Cambodia is another potential hub for clothing factories, as apparel manufacturing accounts for 80% of national export earnings and it employs more people than any other industry. Therefore, it’s little surprise that the government is putting several policies in place to bring more fashion brands into the country.
It allows for 100% foreign equity ownership and an exemption from import duty on machinery and equipment. Cambodia also shares ports with Vietnam, which makes it easier to import raw materials from China.
Indonesia is yet another potential for mass clothing factories. The government plans to turn the country into one of the world’s top five apparel and textile producers by 2030, with a strong focus to digitalise the industry. Plans to achieve this includes top-quality machinery and new, artificial intelligence-ready-factories. So the next time you get dressed, do take a look at the labels of your garment, as it many no longer read “made in China”.
Source: South China Morning Post