Luckyway Eyes Cambodian Plant Amid US Tariff Challenges
Luckyway Home Appliances is considering building a factory in Cambodia due to lower labor and land costs and zero tariffs on US exports. Initially, the company planned to invest in Vietnam or Thailand but shifted focus due to rising costs and competition. Challenges like a less developed local supply chain and skilled labor scarcity remain key concerns.
Luckyway Home Appliances, a Chinese manufacturer primarily exporting fans, is exploring the establishment of a factory in Cambodia. This consideration arises due to Cambodia’s lower labor and land costs and the absence of tariffs on exports to the United States. Initially, Luckyway had planned to construct facilities in Vietnam or Thailand; however, increasing competition has led to an escalation in local prices, prompting a reevaluation of their strategy according to General Manager Li Mingyang.
During a recent visit to an industrial zone in Phnom Penh, Li observed that local wages average USD 208 monthly, which is significantly lower than the corresponding figures in Vietnam. Furthermore, the cost of leasing industrial space in Phnom Penh is approximately USD 2 per square meter, in stark contrast to USD 5 per square meter in Vietnam. Li emphasized that Cambodia’s small trade surplus with the US means exports enjoy zero tariffs, thereby reducing the risk of potential tariff increases.
The impact of US tariffs on Chinese imports has pressured Luckyway’s overseas clients to encourage the company to establish production facilities outside of China. Despite this, there are concerns regarding the immaturity of Cambodia’s local supply chain and the shortage of skilled labor. This situation necessitates the transportation of raw materials and management personnel from China, thereby potentially elevating production costs significantly.
Should Luckyway conclude that their overseas clients would accept a price increase of around 12 percent, they may proceed with investments in a Cambodian factory. Additionally, the company plans to collaborate with its supply chain partners in China to facilitate cost reductions in local production, as noted by Li.
Luckyway Home Appliances is contemplating establishing a factory in Cambodia to navigate lower production costs and avoid US tariffs. The decision comes amid rising expenses in Vietnam and Thailand, as well as demands from overseas clients. However, challenges such as an underdeveloped local supply chain and a lack of skilled workers continue to pose potential barriers to this investment.
Original Source: www.yicaiglobal.com
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