What are the disadvantages of manufacturing in Vietnam? And what are the advantages? Vietnam has many advantages in terms of location, political stability, low labor costs and policies that support foreign companies. However, there are still some disadvantages mainly coming from regulations, legal procedures, infrastructure, productivity and supply chains. If business owners are interested in these two issues, let’s refer to the following content.
The trends driving global companies to move factories to Vietnam
Vietnam has the potential to become the destination for global factories. In just the first two months of 2025, the registered foreign direct investment (FDI) reached US$6.9 billion, up 35.5% year-on-year. The manufacturing and processing sector alone accounted for nearly 66.9% of total FDI in 2024.
This wave of FDI is largely explained by external shifts. Rising production costs in China and ongoing trade tensions have pushed many multinationals to seek alternatives in Asia. At the same time, global brands are under increasing pressure to diversify supply chains after the pandemic and to meet consumer demand for resilient, sustainable sourcing. These broader trends have combined to make Vietnam one of the top relocation choices.
It makes sense, though. Recently, major brands such as Apple, Logitech, SharkNinja, and Wyze have announced moves of production originally planned in China to Vietnam, following escalating tariffs and trade uncertainties. In apparel and footwear, Adidas shifted a significant share of its shoe manufacturing, while in electronics, Amkor and Intel expanded multi-billion-dollar packaging facilities in this Southeast Asian hub.
Advantages of manufacturing in Vietnam
So, why choose this country specifically rather than any other manufacturing base? Here are the pros of manufacturing in Vietnam:
1. Significantly lower labor and operational costs
Labor and operating costs in Vietnam are significantly lower because the Vietnamese currency is valued at a lower rate than in other countries. Therefore, the actual amount that companies have to pay employees will be significantly lower.
The salary of around 332 USD/month on average for manufacturing workers and roughly 347 USD/month in the industry and construction sector, which equals approximately 8.4 million VND and 8.8 million VND respectively, is fairly stable in the Vietnamese labor market. Meanwhile, the average cost of living nationwide is only about 6-7 million VND per person per month.
| Country | Manufacturing Workers (USD/month) | Industry & Construction Sector (USD/month) |
| Vietnam | ~332 | ~347 |
| China | ~1,453 | ~1,500+ |
| Thailand | ~437 | ~460 |
| Indonesia | ~300-350 | ~370 |
| India | ~250-300 | ~320 |
- Access to an increasingly skilled labor pool
In recent years, the quality of human resources in Vietnam has increased significantly. They are not only young and dynamic but also have good skills. Besides that, their ability to absorb, learn and upgrade themselves is also outstanding. Nowadays, it only takes 1-3 years for an intern to have the ability to take on the work of a senior employee. This is a clear advantage compared to Thailand or Indonesia, where it often takes 2–4 years for young workers to reach the same level.
This is because the number of workers in Vietnam increases significantly at the rate of around 600,000-700,000 people per year, making the competition among them increasingly fierce. To compete for a job, workers must constantly improve their qualifications and skills. This inadvertently creates a guarantee of high-quality human resources for global companies in Vietnam.
3. Strategic geographic location and logistics advantages
Vietnam has a very favorable strategic geographical location for logistics with easy access to China, Korea, Japan, and Southeast Asian countries, which are large markets for products as well as materials. Geographically, the country sits on the eastern edge of the Indochinese Peninsula, facing the East Vietnam Sea and directly connecting to both Northeast Asia and ASEAN.
The coastline is also long and has many seaports, always ready for ships with large cargo volumes. Vietnam currently operates over 300 ports, including 34 seaports of different sizes, with major deep-water ports such as Cai Mep-Thi Vai capable of handling vessels up to 200,000 DWT.
In terms of transport modes, Vietnam benefits from multiple logistics corridors: maritime shipping for bulk exports, expanding air freight hubs in Hanoi and Ho Chi Minh City for high-value goods, and cross-border trucking into China. Average sea freight from Vietnam to the U.S. The West Coast takes around 20-30 days, similar to southern China but faster than India (30–50 days). Vietnam also has shorter routes into ASEAN and less congestion risk.
4. Trade agreements and favorable business environment
Another strong advantage of manufacturing in Vietnam is its extensive network of tariff-cutting trade agreements and pro-investment government policies. The country has signed many international trade agreements (FTAs), which help reduce taxes and restrictions, creating favorable conditions for foreign investors.
As of 2025, the number of in-effect FTAs that Vietnam has with its partner countries is up to 16. Some of these agreements allow 0 % import tariffs when exporting goods such as garments, footwear, and electronics to major markets like the EU, Japan, and the UK. That means:
- Lower export prices boost competitiveness of Vietnam-made goods
- Tariff savings raise margins or allow price cuts
- FDI flows in to build factories and tap FTA benefits
- Wider access to premium global markets for Vietnamese manufacturing
Moreover, the government also has preferential policies for foreign enterprises to promote investment capital. For example, Vietnam offers up to 4 years of corporate income tax exemption followed by 9 years at a 50% reduction for eligible projects. This is a favorable condition for global companies to expand their business and production markets.
5. Political stability
Vietnam’s political situation is always considered stable and safe. Domestically, the country has had one‑party leadership for decades and no major unrest.
In terms of foreign relations, the government always advocates maintaining a detente policy and not allowing war to happen. Vietnam is famous for its balanced diplomacy, joining ASEAN, CPTPP, and RCEP while keeping good ties with partners in both East and West. Moreover, Vietnam also has good agreements with military powers such as Russia and the United States, so it receives the protection of these countries.
6. Opportunity amid geopolitical shifts
Learning from the COVID-19 period and the tense political situation in recent years, enterprises are gradually shifting towards the trend of friendshoring (producing in allied countries) and nearshoring (producing in countries near the consumer market).
Accordingly, Vietnam is considered the most suitable place, as it can meet both of these trends due to its strong relationships with other countries and its potential to form new supply chains for global businesses.
According to Bank of America, since 2018, Vietnam has gained +2.1 percentage points in U.S. import market share, reflecting how these reshoring shifts are moving production away from China toward Vietnam.
Disadvantages of manufacturing in Vietnam
Besides the advantages, what are the disadvantages of manufacturing in Vietnam? Let’s explore all the possible cons of setting up and operating production facilities in the country.
1. Infrastructure, logistics, and productivity still lag behind China
Overall, although there are many similar characteristics, infrastructure, logistics, and productivity in Vietnam are still far behind China. Roads and highways remain limited. Ports have weaker connectivity. Power or drainage issues can disrupt operations in some provinces like the Central Highlands. That said, key hubs such as Binh Duong and Hai Phong already have developed infrastructure that supports exports.
Logistics costs are also higher, making up 16-17% of GDP compared to 12-13% in China. Meanwhile, Vietnam’s labor productivity in 2023 was about 37% of China’s level. This is still a gap, but it’s important to note that the trend is improving as more factories invest in training and automation.
2. Import dependency and supply chain limitations for certain materials
While this issue does not apply to all industries, it still affects manufacturers in sectors such as electronics, chemicals, and textiles. Companies in these industries face challenges because many essential inputs are imported instead of locally sourced. For example, over 50% of raw materials for Vietnam’s textile and garment sector come from China.
3. Regulatory complexity and tax challenges
Tax and legal procedures in Vietnam are still quite cumbersome, divided into many layers, which makes the processing time and process complicated and prolonged. According to studies, it takes an average of 384 hours per year for a business in Vietnam to comply with tax procedures. In some cases, central and local administrative units have different ways of handling, which creates difficulties for businesses.
In addition, Vietnam is in the process of innovation, digitalization, and reform, so regulations can change frequently. A recent example is the revision of cadastral maps and land-use classifications, which has slowed down land licensing for new outsourced plants in several provinces.
4. Rising labor costs in key industrial zones
Although labor costs in Vietnam are lower than in other countries, they are on the rise. From 2016 to 2023, Vietnam’s minimum wage jumped by about 50%, and in July 2022 alone it rose by 6% after a two-year freeze.
Enterprises in large industrial zones must calculate wages that both reduce costs and are sufficient to retain highly qualified workers. In addition, the cost of living combined with the government wage adjustment policies also puts labor costs at risk of increasing. Despite improving worker skills and productivity, the upward wage trend is still worth considering.
Manufacturing in Vietnam: Practical tips and key consideration
These are the pros and cons that global companies need to weigh when manufacturing in Vietnam. Generally speaking, the country offers advantages such as competitive costs, a skilled and growing labor force, strategic location, and strong FDI inflows. On the other hand, there are disadvantages including infrastructure gaps, import dependency in some sectors, regulatory complexity, and rising labor costs.
If global companies want to expand their manufacturing footprint in Vietnam, here are a few important tips and considerations:
- Choosing a strategic location to set up a factory: Company owners should look for key industrial parks with good infrastructure, close to key logistics centers.
- Understanding legal and tax regulations: Foreign investors need to understand clearly the regulations on business registration, foreign capital investment, taxes, labor laws, product registration, etc. To avoid legal risks, global enterprises should have a team of lawyers specializing in handling legal issues under Vietnamese law.
- Find many suppliers: To avoid risks of material shortages and high prices causing production delays, foreign investors should find many suppliers and not depend on any single source of supply.
- Having a plan to train and improve employee skills: To improve productivity and quality, and to have a team of employees working with a consistent method and process, enterprises should develop a plan to train and improve employee skills.
- Having a contingency plan: Enterprises should have a contingency plan for situations that negatively impact their business and production, such as supply chain problems, political tensions, changes in regulatory policies, etc.
Conclusion
Business owners already know the answer to what are the disadvantages of manufacturing in Vietnam? The above information also points out the advantages and explains each aspect in detail.
If you intend to find sources of goods and materials made in Vietnam with good quality at proper cost and low MOQs, VinaSources can help. As a first and transparent B2B sourcing platform in Vietnam, VinaSources connects you directly with verified factories, giving you faster lead times, better prices, and lower risk in supplier selection.
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