The furmiture industry of Vietnam has a long history and glorious tradition renown for its diversity and highly-skilled craftmanship. In the last decade, Vietnam furniture gain significant grounds not only in the Asian market but has grown beyond the region quickly. Boosted by keen interest on its very competitive furniture products, the country is currently featured prominently on the radar screen of many international buyers.
The Vietnam furniture industry is characterised by an accelerated influx of foreign investment and the rapid expansion of existing companies. The rapid development and fast market expansion enjoyed is projected to continue into the foreseeable future. In addition to traditional market in the Asia Pacific, Vietnam furniture has attracted great interest from new markets such as USA and Europe. The attraction is very much attributeed to the low cost of products coming out of the country as well as the huge improvement in quality.
Around 70-80% of the raw material used in the woodworking and furniture industry are imported. Vietnam has scarce resources of forest areas with timber for manufacturing use. Illegal logging as well as land clearing for housing and agriculture has limited Vietnam’s resources of natural wood and has led to strict government regulations on lumbering.
Today, Vietnam has a forest area of 16.24 million hectares, of which 9.04 million hectares can be used to plant trees for industrial use. Most of these hectare lands are not in use, as they are situated in areas not suitable for plantation.
In 2007, the government approved a new plan, the Vietnam Forestry Development Strategy 2006-2020, in which the need for importing raw materials will fall drastically. It is expected that the quantity of raw material lumbered a year will amount to 20-24 million m3. A very significant increase in comparison with today’s yearly amount of raw material, 1.5 million m3. The lumber from Vietnam today is of rather low quality which forces the manufactures to import their raw materials. Most of these are from the neighboring countries Laos, Cambodia, Malaysia and Indonesian, but also largely from the U.S., Southern America, New Zealand and other places. The imported woods include oak, pine, eucalypts, and peach. It is estimated that around 90 % of the imported wood to Vietnam are FSC-certified.
Vietnam is said to be home to more than 2000 furniture manufacturers, with around 15% export-focused. The numbers are increasing. Even Chinese manufacturers are reported to be crossing the border to set up processing facilities in Vietnam . In the early of the year 2000s, there were over 1200 wood processing and manufacturing factories with capacity of around 2 million m3 logs a year in Vietnam. Of this figure, 374 are state-owned factory sharing 31% processing capacity. The remainders are privately-owned and foreign-owned (FDI) factories. In 2007, there were 1,500 registered medium- sized and big companies within the wood processing industry, 30% of these are State owned or join stock companies, 60% privately owned while the remaining 10% are foreign owned companies and joint venture companies. Besides, there are also hundreds of thousand small woodworking manufactures that are not registered acccross Vietnam. Up to the year 2009, Vietnam has about 2,520 wood processing establishments, of which 410 are foreign- invested and most of the biggest manufactuerers are locating in the South of Vietnam such as Binh Duong, Quy Nhon.
The main manufactuters for export are concentrated in two geographical clusters: Ho Chi Minh and Central Plato region. These are factories typically with 1000 or more workers and exports around a hundred 40 foot containers each month. There are more than 50 FDI factories with a total registered capital of about USD 105 million. The many advantages the country possesses, such as political stability, low cost labour, convenient geographical location etc, . have helped the country attract investments from furniture manufacturers in the neighbouring co untries. To name a few, Vietnam is a popular manufacturing location for Taiwanese, Malaysian, Indonesian and Chinese companies.
Export value of Vietnam’s wood and furniture industry has the highest growth rate for many years. In 1996, export value of the industry was only USD 61 million and reached nearlly USD 0.5 billion in 2000. Within 5 years recently, wooden furniture industry has become one of the top 10 export sectors of Vietnam.
Year 2006 2007 2008 2009 2010 Volume (USD mill.) 1943.1 2384.6 2829.3 2597.6 3600.00
According to given statistics the export volume of Vietnam furniture had been increasing for the whole past decade from 2000 — 2010 with an exception of the year 2009 due to the global economic recession. In the year 2008, because of the export value, the furniture industry of Vietnam became the fifth — largest wood — product exporter in the world after China, Malaysia, Indonesia and Thailand, and to 2009, Vietnam found itself a the second largest exporter of wooden goods in Southeast Asia. In the year 2010, vietnam set the target of export volume of billion USD 3.2, however it reached much higher than the targeted volume. Vietnam Furniture exports, 2000-2010. US$ million
Vietnam furniture is being exported to over 120 countries. In 2007, after joining WTO, among those destinations for exporting European countries occupy 28 percent, following by Japan 24% and the U.S 20%, holding the biggest markets position at that time. Furniture trends such as rubber, acacia, melaleuca at reseanable prices continue to be popular. In 2009 the rate between those markets were changed. Export wooden products into U.S grew from USD 500,000 in 2006 to USD1.1 billion, which accounts for over 42% of the country’s export value of wood processing industry. Japan (USD 371.7 million, increase of 0.64%) and China (USD 197.9 million, increase of 1.83%). The remaining exports went to markets in UK, Germany, Korea, France, Australia, the Netherlands, Canada and others.
Vietnam’s outdoor furniture is predominantly sold on the international markets, while the indoor goods are to a large degree sold on the domestic market. They are most often sold to hotels, offices and building projects were everything from wooden floors, window panels and kitchen cabinets are ordered. Furthermore, Vietnam is slowly experiencing a larger upper and middle class, who with growing income can afford to buy indoor wooden goods, such as wooden doors, floors, furniture and kitchen cabinets for their homes.
The industry has a significant development: in the past, local wood processing companies passively waited for international customers/importers coming to their factories; but now Vietnamese producers know how to approach importers directly. With macro-economic stability, low labor costs, quality craftsmanship, highly adaptable work force, and its WTO membership, Vietnam has become a very attractive sourcing destination, and indeed an excellent production centre for furniture
Although large scale industrialization of furniture manufacturing is a fairly recent development, the furniture making has long tradition in Vietnam . Skilled labour is abundant. Due to its lower costs, overheads for labour in factories are much lesser. Many foreign companies have been lured to VietNam by such attributes. These advantages are often translated into lower price to customers, greatly enhancing compatitiveness of Vietnam furniture. In addition, with skilled labour, Vietnam factories can fulfill orders for more sophisticated designs without incuring too much increase in cost. The cost and labor advantages, along with the country`s political social stability. As well as its convenient geographical location strongly enhances Vietnam`s position as a mayjor furniture manufacturing center.
However, there are also many challenges the Vietnam furniture faces.
The basic challenge for the Vietnamese woodworking industry is to improve the product quality and hence the value added to products. Several issues are important to address if this challenge is to be overcome, and foreign companies looking to invest in the industry should be aware of these and the business opportunities as well as challenges that they give rise to.
First of all, the issue of shortage of raw material as mentioned above. In the foreseeable future raw materials will have to be imported to Vietnam. A special challenge is the sourcing of accessories such as knobs, hinges, and slide bars. High quality items will often have to be imported although the ongoing developments within the metal industry in Vietnam might improve the supply for the furniture production in a few years.
Secondly, the machinery in use is very often not fully up to date. The worn machinery is often from China, Taiwan, Japan, Germany, Italy, and from the local market. Not all companies can afford advanced machineries and many of them are bought second hand.
Thirdly, Vietnam lacks design expertise. Most furniture is produced based on customer provided designs. However, illegal copying is still a common phenomenon in Vietnam, and the issue of design protection has to be addressed by manufacturers looking to outsource production. There are copyright laws in Vietnam, but implementation is lacking behind and the legal setup not in place for effective prosecution. Seeking design patent is possible, though the process is long and to date only a handful of companies in the industry have bothered obtaining design patents.
Lastly, Vietnam has an abundant labor force. However, the number of skilled labor, incl. for management positions, are limited. Concerns regarding vocational training are being addressed, and schools are being built to educate more skilled workers for the industry. Many industries in Vietnam face this human resources issue, and the woodworking industry is no exception.
Needless to say, the Vietnam furniture industry is growing quickly at the present moment.. The potential development of the wooden furniture industry of Vietnam is very large because the current export volume satisfies only 1% of the actual demand of the world market. Currently remaining issues including the high rate of raw material import (about 1/3 compared to timber exports), a high wastage rate in processing, the increasing exchange rate... reduce the profitability of Vietnamese businesses. The dependence on imported raw wood and risks to face anti-dumping lawsuit of foreign enterprises have created difficulties for wooden furniture processing and exporting enterprises from Vietnam, made them to "walk on two legs", both to the export and domestic markets. Besides, the potential of domestic wood consumption is very large, and the profit of consumption is equivalent to that of export (over $3 billion). However, manufacturers and distributors of products in the wooden furniture industry have paralleled each other for a long time but have not found a common voice to promote the domestic wood consumption growth. Domestic market is divided into construction facilities and retail distribution by the wood processing enterprises. In particular, the market of construction and installment interiors is considered to have many similarities with the production and export market, which gives enterprises more options. In the left array, targeting at small consumers, despite great potential, the enterprises are "bored" because they must have strong capital to build distributing networks, retails, and inventories
In view if this, the Vietnam Government has put in place necessary measure to enhance the industry as follows:
Implement credit policy through development support fund, particularly long and medium trem credit; Apply export premium for businesses with outstanding achievement in export volume or in new market expansion; Include furniture in the country`s key national promotion programs; Implement policy for encouragement of investment, both domestic and FDI into furniture and forestation industry; Implement marketing and trade promotion policy, which aim at key potential markets such as USA, EU and Japan; Consolidate furniture manufacturers and exporters associations./.
Source : http://www.depthai.go.th