Good morning in Vietnam
By Powell Slaughter -- Furniture Today, August 1, 2004
Ho Chi Minh City, Vietnam — Already an emerging source of wood furniture for the U.S. market, Vietnam received a shot in the arm this year from an antidumping investigation of Chinese bedroom manufacturers.
A wave of new plants, factory expansions and new finish lines is creating a boom in case goods capacity. While it sent just $167 million worth of furniture to the United States last year — a mere 3% as much as China — shipments are expected to grow.
Vietnam is developing even quicker than China did, however. Foreign-based manufacturers, many of which are Taiwanese operating plants in mainland China, feel an urgency to provide bedroom sourcing alternatives to China.
Rapid capacity growth is pressuring factories here to get up to speed on quality — especially in finish capability — and has helped inspire the government to invest heavily in improving ports and roads.
Targeting the U.S.
More Vietnamese manufacturers are gearing up to target the U.S. furniture market. Some see an opportunity at the high end, where potential customers don't need the huge production runs often necessary to do business with major Chinese players.
There's no question Vietnam already has a stake in the U.S. market, supplying a number of manufacturers and retailers, and its presence will grow.
In the second half of this year, more than 15 new finish lines will start operation around Ho Chi Minh City, each adding another 100 to 150 containers a month in new capacity. Much of that's already spoken for.
Johnson Wood, for example, began operating a 1.4 million-square-foot plant here last year and is set to add a second finishing line this month that will produce bedroom. Johnson Wood, part of the Taiwanese manufacturing conglomerate Green River Group, produces 150 containers a month now and plans to turn out 250 a month by the end of the year, and 350 a year from now. Total investment for the expansion: $12 million.
"The new line is fully booked August through October, so there's no available capacity for new orders," said Jerry Chang, general manager. "It's a nice problem to have. Our customers are trying to book earlier because of the antidumping investigation."
In June, the U.S. government imposed preliminary duties ranging from 4.9% to 198.08% on Chinese wood bedroom furniture. Chinese factories making about 20% of its exports to the United States got hit with the highest duties, effectively taking them out of the market.
There are no U.S. duties on Vietnamese furniture.
Green River adds finishing line
At the 1.2 million-square-foot Green River plant here, a third finishing line will increase capacity from 285 to 300 containers a month to 350 to 400. Capacity at the plant is 88% committed, said Michael Chen, vice president of Green River Group.
"Once our expansion is in place and running steady, and we have available new capacity of 80 to 100 containers, we'll start contacting potential new customers," he said.
Green River Group also will begin construction on Timber Industry Co., a new 1 million-square-foot bedroom plant. It is set to begin production with two finish lines at the end of this year, employing at least 800 people, and 1,400 within three months.
"Dining we'll keep in China; bedroom we'll move here," Chen said. "We need to ease our capacity constriction here."
Chen, who has been in Vietnam since 1997, believes the established factories have been producing long enough for the U.S. market to have systems in place to absorb extra bedroom business from China without a big spike in quality problems.
He estimated there are more than 30 Chinese- or Taiwanese-controlled factories in all categories across Vietnam ready to do business in the United States.
Hong Yi built its 1.25 million-square-foot plant here in 1999, originally producing dining room. The bedroom-dining mix now is 50-50, and a new finish line going into operation this month will handle only bedroom.
While the Taiwanese downplay the effect of the antidumping investigation on their expansion here, there's no doubt of its impact.
"Five or six years ago, a group of around 20 foreign furniture manufactures came to Vietnam," said Lin Chen Cheng, general manager of Hong Yi. "About 10 more have come since the antidumping campaign started."
While Hong Yi's new finish line will add around 75 containers of open capacity each month, the company, like many other established plants, isn't shopping for new customers.
"We are pretty stacked up right now," Cheng said. "We need to satisfy existing customers before we add any more."
Native Vietnamese manufacturers also are looking to take advantage of U.S. buyers' burgeoning interest in sourcing furniture here.
One of the most ambitious companies is Tien Trien, which is expanding the plant it built last year near Ho Chi Minh City to around 2.5 million square feet. The addition will be complete in around three months, said Nguyen Phi Tien, managing director. Another plant in a different location is planned, and total investment for the facilities will come to around $35 million, he said.
"We plan to have three new finish lines up within two months, another one four or five months later, and maybe a fifth," Tien said. Akzo Nobel and Valspar will supply coatings.
Employment at Tien Trien could reach 3,000 after the expansion. That's a lot of new people to train, but Tien said the company has retained Philippine, Chinese, American and Malaysian operations personnel to get the employees up to speed quickly. Workers recruited from across the country will live in dormitories at the plant — an unusual step for Vietnamese manufacturers, although common in China. The goal is to take U.S. business from 10% to close to all of the company's sales.
The Country Co., a manufacturer of rustic case goods and occasional, mostly in recycled solid pine, is unusual among Vietnamese furniture makers in that it has established its own U.S. distribution, through family members living in America.
"We showed at San Francisco for the second time in July," said Tin Nguyen, marketing director. "We're shipping an average of 100 containers a month, 10% to the U.S., and we'd like to build that to 50%."
Within two years, Country Co. plans to build a 260,000-square-foot plant to replace its 170,000-square-foot factory.
Several factors should speed the development of Vietnamese furniture business in North America, said Nguyen Quoc Khanh, CEO of AA Corp., which has new U.S. customers in Ferguson Copeland, Pennsylvania House and Sarreid.
"Vietnam has all the advantages China did a few years ago — low labor and new factories," he said. "Most important, Vietnam has a tradition of producing Western furniture. We had 100 years of the French presence."
Khanh expects that in a couple of years, foreign-managed manufacturers here will specialize in fast production of huge product runs, while Vietnamese companies will tend to be smaller, emphasizing customer service and communication, with more flexibility in price and design.
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Special Report -- Good morning in Vietnam
Aug 25, 2004 -
Vietnam ready to grow
Aug 22, 2005 -
Vietnam factories poised for growth
Jun 3, 2005 -
Vietnam ready to grow
Sep 4, 2005 -
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