Vietnam News

COVID forces Vietnam factories to choose sleepovers or stoppages

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Key supply chains for Apple, Ikea and Nike hit by strict anti-virus curbs.

Factories in Vietnam making products for Netflix, Ikea and Nike have joined a list of companies forced to halt production as the country battles its deadliest wave of the virus, while other facilities are setting up COVID “bubbles” in an attempt to keep running.

After Samsung and footwear major Pou Chen suspended some production at their factories last week, Vietnam authorities have expanded the number of factories subject to rules requiring them to either house staff on-site or suspend operations.

Apple supplier GoerTek, South Korea’s Kumho Tire, packaging giant Tetra Pak and Nestle are among those that have set up bubbles at their factories.

Among those that have had to pause operations is ASRock, a producer of motherboards and servers owned by Apple supplier Pegatron. ASRock, whose clients include Netflix, estimated that its July revenues would take a 5% to 20% hit after it temporarily stopped production on Monday, according to a security filing. ASRock President Hsu Lung-luen told Nikkei Asia the company would shift production to other contract manufacturers while waiting for local approval of its COVID bubble.

The pandemic is bearing down on supply chains in export-reliant Vietnam, which reported a record 5,926 cases on Sunday, nearly four times the figure for all of 2020.

“[It’s a] hard time for everybody, yet our front-line workers are showing incredible resilience,” said Fausto Tazzi, CEO of Nestle Waters Vietnam.

Nestle has 1,200 workers camped out at plants domestically, but needs vaccines for a sustainable solution, Tazzi said.

After Pou Chen, more Nike suppliers went on hiatus, namely Feng Tay Enterprises, Eclat Textile and Changshin, according to the Vietnamese government. A spokesperson at Eclat Textile, which also supplies Under Armour, told Nikkei it applied to reopen on Monday and does not yet know the scale of the business impact from COVID.

Vietnam is a top exporter of textiles, electronics and home goods.

Ching Feng Home Fashions, which makes curtains for Walmart and Ikea, stated in a Monday securities filing in Taipei that its factory in Binh Duong Province would close from July 19 to Aug. 2, saying it must meet government requirement that employees eat, live and work at the same sites.

Ho Chi Minh City and industrial provinces abutting it — including Binh Duong — lead the latest daily COVID counts. Factories in those locations are required to set up production bubbles in order to stay open. That means providing either food and beds at work, or transportation to ensure workers go directly home.

The bubbles were first required in the south but are spreading to places from central Da Nang, where authorities have warned factories that sleepovers may become necessary, to northern Bac Ninh, where AirPods assembler GoerTek has pitched orange and purple tents for workers, according to footage on state TV.

Other companies whose staff are sleeping on-site include: Kumho Tire, South Korea’s No. 2 tire maker by sales; Tetra Pak, the world’s biggest food packaging company; animal feed producer Cargill, one of the largest unlisted companies in the U.S.; and Digi-Texx, a major software outsourcer to Europe and the U.S.

Ho Chi Minh City is into its second week of Vietnam’s strictest lockdown, including bans on taxis and restaurant delivery. Hanoi and 16 other localities joined the city on Monday in issuing stay-home orders.

As a new parliament convenes on Tuesday, leaders are looking to beat back a stubborn surge of the delta variant that has dragged on for three months. With fewer than 400 deaths for all of the pandemic, Vietnam remains an outperformer after its rapid COVID response kept the virus at bay last year.

However, the Southeast Asian country has vaccinated just 4% of the population due to a shortage of doses across the globe, forcing it to keep in place one of the world’s strictest border closures.

By Lien Hoang & Cheng Ting Fang & Lauly Li – Nikkei Asia – July 20, 2021

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