Apple, Nike, Toyota are among the brands affected. Some are even looking to outsource manufacturing to other countries like India, Bangladesh, Sri Lanka and Indonesia.
The COVID-19 pandemic has forced the Vietnamese government to shut down factories, disrupting global supplies of apparel, electronics, automobiles and shoes to some of the top brands in the US.
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The world’s largest consumer brands such as Nike and Gap depend on Vietnam, Malaysia and Thailand for manufacturing.
Strict curbs imposed by the Vietnamese government to contain the spread of the infection have forced companies to shut factories or reduce operations, sparking off a product shortage amid rising demand before the holiday season.
According to Bloomberg, around two million workers may vacate Vietnam’s southern industrial belt after the government eased mobility restrictions that started in July.
“It’s really bad timing for Vietnam. The holiday season shipments need to happen right away,” Ankiti Bose, Co-Founder of fashion supplier Zilingo, told CNBC.
In Vietnam, the outbreak initially hit northern industrial areas which supply to tech firms like Apple and Samsung. In May, four industrial parks in the northern province of Bac Giang were temporarily shut down. In July, the outbreak spread further south to Ho Chi Minh City and nearby industrial provinces, forcing Taiwan's Pou Chen Corp to shut down operations. Pou Chen Corp makes footwear for Nike and Adidas.
Gripped by the shortage, Nike has cut its fiscal 2022 sales forecast and warned of holiday season delays.
Similarly, buyers of Apple's iPhone 13 have to wait longer as the outbreak in Vietnam has slowed supply of the device's new camera module.
Supply constraints of Robusta coffee beans from Vietnam have pushed prices up to a four-year high.
Car manufacturers like Toyota have also slashed production for September and October on the back of COVID-19 curbs in Vietnam.
In the past few years, Vietnam became the second-largest supplier of clothes and shoes to the US, according to the American Apparel and Footwear Association. Several big brands had shifted manufacturing to Vietnam following the trade war between the US and China.
Some brands are looking to outsource manufacturing to other countries like India, Bangladesh, Sri Lanka and Indonesia.
Leading business associations in Vietnam representing the US, the European Union, South Korea and South East Asian nations have written to Prime Minister Pham Minh Chinh, saying 20 percent manufacturing members have already shifted out of the nation.
"Once production shifts, it is difficult to return," they wrote.
The government is wooing workers with transportation facilities and companies are offering higher salaries and benefits to bring them back to work in the peak production season. But workers are not willing to return.
Adding to the woes are complex travel permit regulations that are baffling truck drivers trying to move goods across the country.
Hamza Harti, Managing Director at FM Logistic Vietnam, told AFP that drivers in Mekong Delta were forced to wait three days and nights in their vehicle before entering Can Tho.
Vietnam also has a poor rate of vaccination, with only 14 percent of the 98 million people being fully vaccinated till now.
(Edited by : Shoma Bhattacharjee)