Robots threaten the livelihoods of millions of Vietnamese workers

Nike and Adidas are two pioneers in automating production lines, which means that these companies will reduce outsourcing activities in developed countries in the future.

Recently, sports equipment and apparel company Nike announced that it will move some shoe production back to the US, on the occasion of President Obama's visit to the company's headquarters in Beaverton, Oregon. According to Portland Business Journal, Nike will automate many parts of its production in the near future. The company has even applied for a patent for the idea of ​​a nearly fully automated shoe factory, which will be operating in Atlanta in 2017.

On August 18, Nike signed a partnership with Apollo Global Management to complete Nike's supply chain in the US. Apollo Global Management will be the main partner helping Nike complete its automated factory.Nike's arch-rival Adidas has even completed the first all-robot shoe factory, the Speedfactory, in Ansbach, Germany.

In the information technology sector, which employs low-skilled workers in large numbers, the footwear and garment industries have also witnessed a revolution of robot workers. Foxconn, China's leading electronics manufacturer, has laid off 60,000 employees producing phone components and replaced them with a new robot system.

In the future, automation of production could push hundreds of millions of workers around the world into unemployment. Photo: Adidas

About 100 million Chinese workers are at risk of unemployment because of rising labor costs in the country, and using robots in manufacturing is even cheaper than hiring some of the world's cheapest workers in countries like Bangladesh, Myanmar, Thailand and Vietnam.

The fact that millions of Vietnamese workers will become unemployed due to competition from robots in the coming years is a big risk for the component manufacturing, garment and footwear industries because these are all key industries of Vietnam. According to a report by the General Department of Customs, in the first six months of the year, these three groups of products alone accounted for 40% of the value of the country's total export turnover.

According to Mr. Nguyen Van Khanh, General Secretary of the Vietnam Leather and Footwear Association, automated production technology is still quite new, and may only have advantages in the production of sports shoes with fabric and rubber materials. For leather shoes, there are still many stages that robots cannot do, but he believes that once robot technology develops, the possibility of humans being replaced in the leather shoe sector is also very high.

"A footwear manufacturing enterprise incurs many costs such as health insurance, union fees, food, accommodation, etc. for workers. Therefore, if the robotic production process develops, it is inevitable that enterprises will have to lay off workers to save costs," said Mr. Khanh.

Commenting on the trend of using robots in production affecting domestic labor, Mr. Diep Thanh Kiet, Vice President of the Vietnam Leather and Footwear Association, said that the fashion industry is different from the mechanical and electronic industries - industries that can be 100% automated.

“Most of us still have a feeling that is difficult to describe, hesitant when deciding to buy a fashion product that is completely produced by machines,” Mr. Kiet said, analyzing the immediate advantages of Vietnamese workers: “The FOB price of a pair of fabric sneakers in Vietnam is on average 10 USD per pair. The retail price at the place of consumption of a mid-range brand is about 50 USD per pair. The difference between the FOB price and the retail price, including transportation, import tax, storage fees, distribution, retail fees, etc., is the amount worth cutting. Except for the transportation fee, which is about 50-60 cents per pair (from Vietnam to Europe), all remaining costs arise at the place of consumption.”

According to the Vice President of the Leather and Footwear Association, with free trade agreements (FTAs) such as the Trans-Pacific Partnership (TPP), the EU-Vietnam Free Trade Agreement (EVFTA), etc., import taxes on leather and footwear products will be cut to 0%. Even if labor costs increase by about 12% in the next 10 years, overall, that increase is still insignificant compared to a series of tax incentives for import businesses.

“In the end, labor costs do not have much impact on the selling price of products in the consumer market, but it is the costs arising in the import market that need to be cut,” Mr. Kiet analyzed.

However, he also acknowledged that automation in fashion production is threatening to overturn the competitive advantage of developing countries with cheap labor in Asia. Vietnam has so far focused on exporting resources and selling labor, while innovation in production has not yet had clear developments and has not created high added value in the global value chain.

Therefore, Vietnam's industry needs to have a domestic automation strategy for the manufacturing industry in general and the footwear industry in particular because Vietnamese labor costs cannot be cheap forever. "Overall, automation will help improve the country's competitiveness. International brands will be very pleased to set up production bases in a country with a strong automation industry. But at the same time, the Government also needs to have a long-term solution to ensure the welfare of workers when jobs are cut," Mr. Diep Thanh Kiet concluded.

According to VNE