Vietnam ready to grow
Factories targeting U.S., Europe
Thomas Russell -- Furniture Today, August 22, 2005
HO CHI MINH CITY, Vietnam -- Furniture manufacturers in this region continue to boost capacity in hopes of landing more business in U.S. and European markets.
They are building on growth Vietnam saw in 2004, when shipments of furniture to the United States more than doubled to over $364 million. Some of that no doubt was due to U.S. importers shifting bedroom sourcing here during the antidumping investigation of Chinese producers. Smaller-than-expected duties have sent some of that business back to China, but Vietnam's sales remain strong.And the activity is not just in bedroom, but in a broad spectrum of products ranging from occasional and accent furniture to casual dining, youth furniture and ready-to-assemble. For example:* Savimex Corp. expects to export $2 million in occasional furniture to the United States this year and is looking to double its U.S. sales in 2006, expanding into goods including dining, RTA home office and home entertainment. It is investing $1 million in machinery in its Ho Chi Minh City plant.* ASC, a producer of promotional case goods, began exporting to the United States this year and is now shipping three or four containers a month, mostly of occasional furniture. It has two plants totaling 300,000 square feet in the Dong Nai Province, just north of the city, and this year will begin construction of another 200,000-square-foot factory that will increase its capacity by about 40%. It hopes to ship more occasional as well as dining room and bedroom furniture to U.S. customers.* Outdoor furniture and case goods manufacturer Forimex is also looking to boost its U.S. exports. It will open a new plant in the Ho Chi Minh City area in early 2007 that will produce 20 containers a month, said Vo Viet Doan, a vice director.Along with rising demand from U.S. consumers, what's fueling the growth is a highly skilled and inexpensive labor force. Factory officials say a typical worker in Vietnam makes about $50 to $60 a month, although the rate can be higher depending on the season or type of product.Many factories also provide meals, medical facilities and even housing, factors that increase total labor costs. Still, the labor rate is comparable to China, which allows companies to use labor-intensive carving and marquetry. For instance, Tan Thanh Co., a producer of midpriced to high-end chairs for the U.S. market, has 300 carvers at its 1,200-employee Ho Chi Minh City factory. The plant produces 10,000 chairs a month, for a total annual sales volume of $7.5 million.Rochdale Spears, which specializes in accent and occasional furniture, has 550 production workers, including 40 carvers. An OEM supplier for clients such as John-Richard, Thomasville, Century and Drexel Heritage, the company can do complex veneer work and has a foundry that creates hardware and other metal components.In May, AA Corp. opened a 150,000-square-foot dedicated plant for U.S. importer Ferguson Copeland 20 miles west of Ho Chi Minh City. In June, it was producing about 10 containers of high-end bedroom and occasional furniture a month. By next April, it expects to produce 30 a month. Despite the talented labor force, some hurdles remain for Vietnamese furniture manufacturers.Some producers now serving the European and Japanese markets believe it will be a challenge to shift to products suitable in size and scale for the U.S. market.That's an issue now facing RTA manufacturer Savimex. It is selling mainly in Japan, where homes and living quarters generally are smaller than in the United States. It will use the new equipment it plans to purchase to help make products for the U.S. market.Some manufacturers also say infrastructure improvements are sorely needed (see story at left). With small ports, goods often are sent out on small ships, then transferred to larger ships in Singapore or Hong Kong. That translates into a 15% higher shipping cost than shipping goods from larger ports in China, and creates a five-day shipping disadvantage from Vietnam."Infrastructure is a big issue in Vietnam," said Geoffrey Hawkes, chairman of Rochdale Spears, noting the government is taking steps to improve ports and roads.Still, some of those improvements are years away. "It takes awhile," Hawkes said. "(Vietnam) hasn't got the gross domestic product China has. It's a slow process over here."He said another issue in Vietnam is employee turnover, which could be addressed by better worker training.
Still, he is optimistic about Rochdale Spears' prospects in Vietnam, and is considering recommending a plant expansion to his board. The company, which sells mainly to the U.S. market, also hopes to increase its sales in Europe.For outdoor and indoor furniture manufacturer Scansia Pacific, Europe accounted for 80% of the company's $25 million in sales in 2004. Production in its five factories totals about 1,100 containers a year, including 300 for indoor. Of that 300, roughly a third is shipped to the United States.Today, much of the indoor furniture is made at sister company International Furniture Corp. Early next year, Scansia Pacific will begin more indoor furniture production at a new 1.8 million-square-foot plant in Dong Nai.Eventually, the new plant could produce as much as $50 million a year in indoor and outdoor furniture. Nguyen Chien Thang, company managing director, said he eventually would like to see half of that go to the U.S. market.Outdoor specialist Khai Vy Corp. also aims to boost indoor production, particularly for the U.S. market. In 2004, about 15% of its $35 million in annual sales was for indoor, most of which was for U.S. consumption. Its indoor products include dining room, stools, kitchen carts and some occasional tables.Later this year, it plans to open a new $11.5 million medium-density fiberboard and wood processing complex in Binh Dinh Province, about 435 miles north of HCMC.
