In 2024, China exported components and materials worth $163 billion to Vietnam. More than it exported to Japan.
That is a number worth keeping in mind before deciding that moving production to Vietnam solves your dependency on a single country. The difference between smart diversification and an expensive illusion of security starts right there.
Why everyone talks about Vietnam, and what is actually true
Vietnam is not hype. It is a mature manufacturing hub with real advantages. Exports are growing 14 percent year over year. Around 65 percent of Apple’s AirPods are produced there. LEGO has built a $1 billion factory in the country. Labor costs are on average about half of China’s, which for labor-intensive categories is a measurable advantage, not a marketing slogan.
Companies that tested Vietnam in furniture, textiles, or consumer electronics assembly have seen clear benefits. The problem begins when Vietnam is treated as a complete answer to diversification. It isn’t the answer. It’s just the starting point.
The trap no one tells you about: Vietnam still buys from China
This is the core of the entire dual-sourcing story, and a conclusion that is rarely stated openly. Vietnam imports over $144 billion worth of materials and components from China every year. In textiles, 64 to 80 percent of raw materials come from China. In electronics, Chinese components account for roughly one quarter of production inputs.
In practice, “Made in Vietnam” often means “Assembled in Vietnam from Chinese parts.” For European importers dealing with EUDR, CBAM, or supply-chain due diligence requirements, this is not an academic detail. It is a direct regulatory risk.
An audit of a Vietnamese supplier that stops at the registered address may miss the fact that critical components come from a Chinese factory owned by the same group as the original Chinese supplier. In that scenario, dual sourcing China plus Vietnam does not eliminate China risk. It simply moves it one step further upstream.
When dual sourcing actually works: segmentation, not migration
The most effective model is not “move everything to Vietnam.” It is precise category allocation.
Where Vietnam wins
Footwear, apparel, furniture, consumer electronics assembly, and simple household appliances.
Where China remains unmatched
Complex components, precision mechanics, chemicals, and advanced automation.
For many products, the optimal architecture is a split model: components sourced from Dongguan or Shenzhen, final assembly in Ho Chi Minh City or Bac Ninh. Geographically, it works. A container from Shenzhen to Haiphong costs about $160 to $200 and takes around two days. That creates a just-in-time across the border model, with China as the component warehouse and Vietnam as the assembly floor.
It works, but only if you clearly understand what you source where, have properly structured contracts on both sides, and aligned quality control processes. The decision must come from category analysis, not from a headline about tariffs.
The risks that rarely make it into financial models
Three things are often missing from dual-sourcing calculations.
Internal logistics costs in Vietnam
They represent 20 to 25 percent of GDP, two to three times the global average. Part of the labor-cost savings disappears here before the product even reaches the port.
Ownership structure of Vietnamese factories
China accounts for roughly one third of foreign direct investment in Vietnam. Many factories are subsidiaries or joint ventures with Chinese controlling capital. Changing the address on the label while the decision center remains the same is not diversification. It is cosmetic.
Regulatory risk linked to transshipment
The United States has announced 40 percent tariffs on goods transshipped through Vietnam. The direction is clear: rules around country of origin will tighten, not loosen. Strategies built purely on tariff arbitrage have a limited shelf life.
How to build a dual-sourcing strategy that will survive the next 5 years
Four principles separate architecture from improvisation.
Start with a category audit
Which products can Vietnam produce independently of Chinese inputs? The answer differs by product category and determines whether diversification truly reduces risk.
Verify suppliers beyond the registered address
Ownership structure, component origin, and the real decision center must be understood before signing a contract.
Don’t treat Vietnam as a tariff hedge
Companies that enter solely to bypass tariffs build purely transactional relationships and lose negotiating power when supplier prices and industrial land costs inevitably rise.
Build relationships now
About 43 percent of US companies are already actively diversifying their supplier base, and FDI in Vietnam exceeded $36 billion last year. The window for favorable entry conditions is narrowing.
Final thought
Dual sourcing China plus Vietnam is not a decision you make once. It is an architecture you build over years, supplier by supplier, category by category. Companies that start doing it properly today will have a real competitive advantage by 2027, when new tariff rules and ESG requirements eliminate those who only changed the address on the label.
Key takeaways
• Vietnam is a real manufacturing hub, but not a one-stop answer to China dependency.
• Around $144 billion of materials and components flow from China into Vietnam every year.
• Dual sourcing works as category segmentation: components in China, assembly in Vietnam, not blanket migration.
• Audit supplier ownership and component origin beyond the registered address, especially under EUDR and CBAM.
• Build a dual-sourcing architecture now; the window for favorable entry into Vietnam is narrowing.