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Vietnam: the world’s woodwork factory
In recent decades, the Vietnamese wood industry, from a small craft industry, has grown rapidly to become a global processing industry.
Last year, thanks to its shift to “online sales” and changes in product structure that was in line with consumer trends in the world in the time of the Covid-19 pandemic, Duc Thanh Woodwork Company obtained high revenues. In 2021, it completed 50% of the whole-year plan within the first two months of the year.
Not only happy when revenue in 2020 increased by 40%, Ms. Pham Thi Hong Quang, General Director of Nguon Viet Handicraft Company, said that her company was able to sell products that had gone unsold for years. The unsold noise-resistant boards were turned into “unique” tables for meeting rooms. This product was advertised online and became a “hot” product, which was favored by many foreign customers.
Earning high revenue in 2020, Dau Tieng Wood Company plans to build a new factory on an area of 10 hectares specializing in making refined products for export. Its current factory has been operating at full capacity.
US$13 billion roadmap
According to statistics from the Ministry of Agriculture and Rural Development, the export of wood and wood products in 2020 hit about $13 billion, an increase of more than 16% compared to 2019. In the first quarter of 2021, this sector earned nearly $4 billion, 46% up year on year.
Former Deputy Minister of Agriculture and Rural Development Ha Cong Tuan once said that the pandemic had affected the entire forestry industry, in the period from March to May 2020, orders decreased, both exports and import of raw materials stagnated, and these factors hit production.
However, “necessity is the mother of invention”. When direct sales are restricted, wood businesses have to switch to online sales. They have taken advantage of the opportunities from the change of the market to make connections with major markets such as the US, China and others to make records.
In recent decades, the Vietnamese wood industry, from a small craft industry, has grown rapidly to become a global processing industry.
Mr. Nguyen Chanh Phuong, Vice Chairman of Ho Chi Minh City Handicraft and Woodworking Association, said that in 2020, Vietnam surpassed Poland, Germany and Italy to rise to second place, just behind China, in the world’s top wood and wood products exporters.
The export turnover of Vietnam’s wooden furniture rose from $219 million in 2000 to $13 billion in 2020, the highest growth rate for an export item of Vietnam. Vietnamese furniture holds the top position in the “billion-dollar export club” of Vietnam. Vietnamese wood products are exported to 140 countries and territories around the world.
More importantly, the Vietnamese wood industry has transformed into a “green” way. Most Vietnam’s consumer wood products are made from plantation timber. In recent years, the import of wood materials has decreased significantly, as the rate of raw materials from planted forests increased. The forest industry is developing in a sustainable way. Currently, Vietnam has 4.3 million hectares of planted forests, providing about 48 million m3 of wood.
According to experts, in agriculture, the key commodity groups only do well in the production stage, while the chain link and the processing stage are still the weaknesses that hinders their development.
The wood-furniture industry is a special case as it has built an almost complete value chain with close links between the stages of afforestation, processing, and trade. Therefore, the labor productivity of the wood industry in 2010 reached about $17,000/person/year and at present is about $25,000/person/year.
The rise of Vietnamese woodwork
The world’s furniture market is worth about $450 billion a year. Vietnam only accounts for slightly more than 6% of the market share, so Vietnamese wood still has many opportunities. Besides the traditional markets with high export value such as the US, Japan, China, the EU, and South Korea, Vietnam can explore potential markets like Canada, Russia, India and the Middle East.
The wood and woodwork industry aims to earn export revenue of at least $14.5 billion in 2021, an increase of about 9.6% year on year and up to $20 billion by 2025, to become the world’s wooden furniture manufacturing, processing and exporting factory.
The Vietnamese woodwork industry has built a strong foundation of production capacity, innovative technology, improved corporate governance, higher product standards and flexible responses to customer demands. The industry currently has large enterprises capable of supplying products to distribution channels and large customers, and also small production units with flexibility which can provide small orders to smaller groups of buyers through e-commerce platforms.
However, wood enterprises have admitted that in the product value chain consisting of four stages of production, trade, design and brand, Vietnamese enterprises have only achieved production and commercial value. Most businesses still operate based on orders of international traders. They only focus on making money from product hardware, and have not developed software through design and labor skills to add creative thinking to enhance added value of products.
“Without design, unique product, brand, despite good production capabilities, modern production lines, and high specialization, we can only wait for customers, wait for opportunities and cannot be proactive in business,” said Mr. Nguyen Chanh Phuong – Chairman of Danh Moc Company.
To not only be a production factory but also move up in the global chain, Vietnam needs a strategy to increase the output of raw materials from planted forest wood, expand large-scale concentrated wood processing facilities, and develop the design and branding stages.
Instead of making money with hands-on skills and diligence in production, Vietnamese businesses need to develop their own brands.
Consumer demand for furniture will change over time. Instead of buying a chair to sit I , a bed to lie down, they now want to buy artworks to decorate their living space. Product design is the most valuable in the value chain, so Vietnamese wood enterprises need to be creative to participate in the game named “international brands” to create Vietnamese style for global audiences.
Tam An
Source: https://vietnamnet.vn/en/feature/vietnam-the-world-s-woodwork-factory-740171.html