Vietnam's textile and garment industry hits the bottom of difficulty

"In the clothing sector, enterprises often get modest and scattered orders. Never previously had a company with thousands of workers received orders for 500–1,000 coats, but they had no choice. Or there are many orders, the unit price drops dramatically, and many product codes are reduced by up to 50%," said Cao Huu Hieu, General Director of the Vietnam National Textile and Garment Group (Vinatex), adding that difficulties lasting until 2022 push the textile industry into an unprecedented predicament.

In general, the export value of Vietnam's textile and garment sector declined by 16.7% in the first seven months of 2023, reaching $21.5 billion, according to the Ministry of Industry and Trade. Exports suffered as a result of poor demand in key countries, high borrowing costs, and sluggish economic development. "It can be said that throughout the entire time that Viet Tien has been a joint stock company, it has never faced a decline in global aggregate demand, even during the period of the global economic crisis in 2008-2009," Mr. Le Tien Truong, Chairman of the Vinatex Board of Directors, noted.

VNDirect reports a 17.5% decrease in revenue and net profit for listed textile enterprises in Q1 2023, mainly due to weak consumption. Interest expense increased by 42.5% yoy, and the industry's gross profit margin decreased by 4.3 percentage points due to fiber supplier reductions and high input costs.

Vinatex's revenue decreased by 15.5% in 6 months, while Song Hong Garment's revenue and net profit decreased by 41.1% and 110.6 billion, respectively. Thanh Cong Textile and Garment Company experienced a 26.7% decline in revenue and a 55.9% decrease in net profit.

In this regard, Mr. Le Tien Truong predicted: "World textile and apparel demand will decline in the two years 2023–2024 due to high inventories due to overbought conditions in early 2022."

VNDirect reports improved textile product export value since May, signaling a recovery in consumption demand. ADS's yarn and towel exports to China and Japan increased by 2.6 times, reaching 5,600 tons. Century Yarn's export revenue increased by 53% in six months.

Vietnamese textile and garment enterprises anticipate increased demand for products during holidays and Tet. China's cutting lending and savings rates will benefit yarn manufacturers like ADS.

Over the years, the US has become an important import market for Vietnam's textiles and garments. But the value of Vietnam's fabric and garment exports to the US decreased by 25.7% year-on-year in the first six months of 2023, reaching $7.04 billion.

However, the second quarter's own data was 27.2% higher than the first quarter, reaching $3.94 billion, bringing expectations that demand for fabrics and apparel products in the US will return to growth trajectory. since the first quarter of 2024 thanks to a more positive macroeconomic situation.

Meanwhile, the EU market has not shown any signs of recovery, although the tariff barriers for garment products exported to this market continue to be lowered thanks to the EVFTA Agreement. Vietnam's export turnover of fabrics and garments to the EU in six months decreased by 10.2% over the same period, reaching $1.89 billion. 

Vinatex leaders attribute Vietnam's textile and garment industry's decline in export turnover and market share to market gloom, shifting orders to countries with advantages, and declining competitiveness. Viet Tien Garment's Chairman, Vu Duc Giang, highlights difficulties with strict brand requirements and Sustainable Development policies.

Therefore, Vietnamese textile and garment enterprises need to change quickly to adapt to the transition from highly specialized production to the production of small, competitive items. Enterprises also have to reorganize production lines and technologies to convert to a greener, more environmentally friendly production model.

“Vinatex is oriented to become a green solution package destination for corporate customers in the global supply chain of the world textile industry. The goal for the period 2021-2025 is to become a full-service knitting product supplier with a production scale of 30,000-35,000 tons of fabric per year," said Vinatex's General Director.