Nike could face shortage of "Made in Vietnam" sneakers as COVID-19 accelerates

Nike is facing a potential shortage of sneakers made in Vietnam as suppliers are held up by COVID-19

Two of Nike Inc.'s suppliers in Vietnam – Changshin Vietnam Co., Ltd. and Pou Chen Corporation – have temporarily suspended manufacturing to curb the spread of the coronavirus. This may exacerbate supply chain disruptions for Nike.

In the 2020 fiscal year, Nike said contract factories in Vietnam made roughly 50 per cent of its branded footwear. Meanwhile, global trade company Panjiva's data shows that Vietnam accounted for 49 per cent of US seaborne imports linked to Nike and its products in the second quarter of 2021 after growth of 6.6 per cent on-year.

Nike's imports from Vietnam are led by footwear, which was included in 82 per cent of shipments in the 12 months to June 30 after climbing 28.8 per cent in the second quarter of 2021 versus a year earlier. That raises the question as to whether other major sneaker brands may face similar challenges.

"The health and safety of our teammates, as well as that of our suppliers, remains our top priority,” a Nike spokeswoman told CNBC in an emailed statement.

“We continue to work with our suppliers to support their efforts in responding to the dynamic and unprecedented nature of COVID-19,” she said. “As we continue to navigate these circumstances, we expect our suppliers to prioritise the health and livelihoods of their employees and continue to comply with legal requirements and the Nike Code of Conduct on the provision of wages, benefits, and severance. We are confident in Nike’s ability to navigate these near-term dynamics and we remain prudent in our planning.”

Taiwanese foot manufacturer Pouyuen Vietnam suspended the operation of its factory in Ho Chi Minh City from July 14 to 23 as it can not arrange on-site camps and coronavirus testing every three days for all employees.

Pouyuen Vietnam is the largest employer in Ho Chi Minh City with over 56,000 employees. Cu Phat Nghiep, trade union chairman at the company, said that it is hard to prepare on-site camps for so many workers. The company also mulled about reducing production and headcount, however, even if the production is kept at a minimum of 30 per cent, the company would will have to provide accomodation for 16,000 workers.

Meanwhile, Changshin Vietnam, a South Korean shoemaker, also had to shut down three of its factories in the southern province of Dong Nai from July 15 to 20. The company, which employ nearly 42,000 workers, has detected a virus cluster at its factories.