Furniture Industry in Vietnam
Industry Overview
The furniture industry of Vietnam has a long history and glorious tradition renowned for its diversity and
highly-skilled craftsmanship. Vietnam furniture has gained significant grounds not only in the Asian
market but has grown beyond the region quickly. The past ten years have witnessed wooden products
becoming one of five key export products of Vietnam.
The domestic and export consumption of furniture and wooden products would be roughly 7 billion
dollars in 2012. Exports have been the major driver of the country furniture industry accounting for more
than 80% of the total output. As per CSIL - an Italian industry research center, revenue in recent years has
shown remarkable development and the country has become the largest furniture producer in Southeast
Asia and one of the five biggest worldwide. Vietnamese wooden products have been exported to 120
countries and territories.
The competitive ability for wood products has improved to a high degree in recent years, competitive to
regions such as Thailand, Indonesia, Malaysia and the Philippines. The furniture can now compete with
products made in China, which is the top furniture exporter in the world.
The availability of skilled workers and relatively low production costs along with government incentives
to attract foreign direct investment (FDI) made Vietnam an attractive furniture manufacturing centre. The
Vietnam furniture industry is also characterized by an accelerated influx of foreign investment and
the rapid expansion of existing companies.
Industry Structure
Vietnam has wood reserves of 600 million cubic meters, but it can harvest only three million cubic meters
of wood every year. Vietnam has nearly 6,500 timber and forestry processing businesses with a total of
more than 400,000 employees. These firms are located mainly in Ho Chi Minh City and Binh Duong,
Dong Nai, and Binh Dinh Provinces.
Wooden furniture occupies the major part of furniture products, followed by metal furniture, while rattan
furniture and plastic furniture takes up only a few.
Wood furniture production in Vietnam is carried out in both craft villages and by industrial processing
(factory-based). There are 4 main centers for wood furniture production: In the Red Delta river, in Binh
Dinh province, the Central Highlands (Gia Lai and Dak Lak) and southern Vietnam (Binh Duong,
Hochiminh City, Dong Nai and Long An).
The industry has a number of competitive advantages, chief of which is robust Original equipment
Manufacturer capability. This is demonstrated by Global Sources findings that 90 percent of turnout is
produced according to customers’ specifications.
Wood processing Industry
The domestic furniture sector is highly fragmented. Furniture manufacturers in Vietnam can be ranked
into three categories: Small scale plants established and operating by private families, medium scale
companies-local owned and large manufacturing companies, joint venture and foreign owned.
Structure of Furniture industry
Based on Ownership
Non State Owned
Foreign invested
State Owned
Enterprises
Enterprises
Enterprises
33.7%
62%
4.3%
Based on Investment (Capital)
Micro & Small
Medium
Large
93%
5.5%
1.2%
Based on Labour
Micro ( 0 – 9
Small ( 10 – 50 workers)
Medium & large (>50 - 200)
49%
4.2%
Workers)
46%
Source: Ministry of Agriculture and Rural Development, UNIDO Viet Nam Industrial Investment report
2011
Vietnam is a popular manufacturing location for Taiwanese, Malaysian, Indonesian and Chinese
companies. There are also big Scandinavian and US companies’ active on the Vietnamese market.
Among these are Scancom, IKEA, and Scanasia.
The Medium and large plant enterprises have invested in improved technology equipments in line with
developed countries such as Japan, Germany, Italy and the US. They have not reached advanced level as
yet but have high degree of mechanization and the products meet the international standards of quality.
However, Employees of most processing facilities are from micro firms, usually from tiny and small
villages. These employees have virtually no basic training, low quality equipments which leads to low
productivity.
The industry produces four main types of products. i.e. Exterior furniture, interior furniture, fine arts
products made from natural wood and rattan and bamboo products
Wood and Wooden products export structure in 2012
Source: VIFA fair, http://www.vifafair.com/site/vifa-information/welcome-to-vifa-2013
Furniture and wood products Exports
According to the General Statistics Office of Vietnam (GSO), wood and timber products exports reached
US$3.4 billion in the first 9 months of 2012. The average monthly export value was US$377 million,
even up to US$400 million in latter two months of 2012. The total export volume for 2012 reached
US$4.6 billion.
Export revenue and YoY growth rate for 2005-2012
Source: General Department of Vietnam Customs
Export volume of furniture industry has been increasing since 2000 with an exception in the year 2009
due to global economic recession. Vietnam’s furniture exports have surged from US$ 1.6 Billion in 2005
to US$ 4.6 billion in 2012. As per HAWA (Handicraft & Wood Industry Association), the average annual
growth rate of wood exports has reached 16.5%. The Vietnam wood export has about 2% share of world’s
wood exports.
Wooden products export structure by market in first 9 months of 2012
Source: General Department of Vietnam Customs
Furniture products from Vietnam are exported to over 120 countries. In the first nine months of 2012, the
US topped the export figure of volume of wood and timber products worth US$1.3 billion, followed by
China (US$547 million), Japan (US$498 million), South Korea (US$159 million) and the UK (US$135
million).
Vietnamese furniture market has penetrated the South Korean market and the export to Korea has been
increasing over the years. Many Korean consumers have chosen made-in-Vietnam furniture and home
utensils as Vietnam and the Korea share similarities in culture and consumer taste.
Raw material Imports
Along with the increase in export of furniture, the import demand for wood raw materials too has
increased. The average growth rate of imports for wood raw materials over 2007-2012 has been 12.1%.
Wood imports from 2006 – 2012 and YoY growth rate
Source: General Department of Vietnam Customs
Wood import market of Vietnam in 2012
Source: MOIT – Analysis by HAWA
Vietnam also imports wood from Africa, particularly from South Africa. However, imports decreased
sharply till 2010 & 2011, but again increased sharply in 2012. Also orange wood is imported from
Cambodia.
Domestic Market
Only 20% of total income for manufacturers comes from the domestic market. Vietnamese wooden
furniture exporters have committed that they still have not found the way to conquer the home market,
because they do not understand the Vietnamese taste well.
Analysts have commented that Vietnamese wooden furniture manufacturers have regrettably missed the
home market which has a high demand, diversified taste (both low cost Chinese to high quality Italian
products are available) and the people’s readiness to pay for furniture products. This could be due to the
lack of cooperation between manufacturers and designers.
As a result, Vietnam has to import 2.4 billion dollars worth of wooden products every year. The domestic
market has been flooded with Chinese, Malaysian and Taiwanese products. The housing development
holds up to 90 percent of the total demand of the total wooden furniture market. In order to penetrate the
domestic market, enterprises would have to spend money and time on the market surveys, designing and
distribution. Vietnamese manufacturers would also have to manage both the production and distribution
works, while they still do not have well developed wholesale and retail networks yet, to conquer the
domestic market.
Vietnamese furniture enterprises prefer making products for export, because they can arrange production
in a large scale and fulfill big orders. Meanwhile, if targeting the domestic market, they would have to
diversify the designs continually to satisfy small orders.
Regulations
The players in the furniture sector have to meet the requirements of



Wood certified legal origin
FSC Certified Wood
Full documentation, lawful traceability
Circular No 1 of the Ministry of Agriculture and Rural development stipulates that wooden products must
be approved by local park rangers prior to their shipment. This new requirement was issued and took
effect in July 2012.
Below are the laws and regulations that are currently being imposed on the timber and furniture industry
to prevent the use of illegal timber in furniture products.

Law of Forest protection and development

Circular no. 01/2012/TT-BNNPTNT - “Regulation of documentation concerns the legality and the
inspection of the source of forest products"

Ministry of Agriculture and Rural Development is reviewing the legal system management, have
defined legal timber.

The timber legality definition and TLAS (Timber Legality Assurance System) which will be pending
after VPA is agreed expectedly in January 2013. TLAS is an effective system for ensuring legality
includes checks of forest operations as well as controlling the transport and processing of timber
through different owners, from harvesting to point of export. Vietnam is the process of negotiating a
VPA with EU.
FLEGT

The negotiations were expected to be concluded by mid-2012 and official enforcement of the
agreements will begin in 2013 when FLEGT comes into force throughout the EU.
HAWA (Handicraft & Wood Industry Association)
Established in 1990, HAWA (Handicraft & Wood Industry Association of Ho Chi Minh City) is regarded
as a support organization to Vietnam Furniture Industry. In June 2007 HAWA was established as a Jointstock company. HAWA has around 314 members, which mainly present enterprises operating in the field
of handicrafts and wood industry. HAWA’s activities range from promoting wood processing to furniture
and interior design.
Activities of HAWA
Source: HAWA (Handicraft & Wood Industry Association)
The geographical distribution of HAWA:
1. Ho Chi Minh City and adjoining provinces (such as Binh Duong, Dong Nai) – 51%
2. Other provinces – 49%
The main objective of HAWA is to protect the interests of its members, organize fairs, training,
conference and seminars. It also provides members useful information on about the source of wood,
market, technologies and business opportunities.
Binh Duong Furniture Association (BIFA)
Binh Duong Furniture Association (BIFA) was established in March 2009, as a voluntary organization of
Binh Duong's enterprises. The Association includes the following business such as Interior and Exterior
Furniture Production, Consulting, Design and Decoration, Wood Handicraft, Equipment, Machinery and
Accessories for wood industry.
The main purpose of the association is to represent and protecting the legitimate interests of members,
share experience of production management, business and labor, facilitate joint training of human
resources in various forms for the wood processing industry in Binh Duong province, promoting intraregional trade and provide information on legal, market, customers, technology, suppliers etc to support
the members in the business planning issues.
Binh Duong Furniture Association has the advantage of a provincial association of timber and leads the
country to in export furniture sales which accounts for 50% of the country's furniture exports.
Foreign Investment
Presently, Vietnam is both a significant exporter of furniture and is also hosting several foreign
production facilities.
Among the investments made in furniture sector, 16% is coming from FDI. Around 50% of export
turnover is made FDI invested units. Investments have come in from 26 countries and territories of which
major part is by Taiwan with 43 5% followed by Korean, UK, Japan and China.
Industry Strengths

Vietnam has one of the lowest industrial wage structures in the world. The cheap and abundant labor
force is a clear strength for the wood processing industry

Vietnam’s stable political system and macro-economic stability, relatively relaxed trading laws and
added government incentives have served to bring many foreign investors to the country.

Vietnam also has a developing infrastructure system and easy access to global shipping that allows
smooth flow of exports

Vietnam is rich in culture. This is translated into the furniture design and can be seen in the exquisite
showmanship of furniture products.

The increasing global demand for lower cost furniture and the global sourcing policy of retailers
operating in this market segment (e.g. IKEA).

WTO membership - Vietnam joining the WTO provided opportunity to develop and access the world
market. Its trade relationship with US and Europe has assisted to a large extent to the industry growth.
Opportunities and Trends
Vietnamese manufacturers are progressing quickly from mass production to catering to middle and highend markets. They are better aware of the need to understand consumer tastes in different markets, and
have developed their marketing and promotion capabilities to expand their reach to them.
If negotiations on the Trans-Pacific Partnership (TPP) agreement succeed, more Latin American countries
such as Chile and Peru will come to Vietnam to inspect the local wood processing industry.
Trends in the timber export industry are moving from outdoor furniture to indoor furniture. Expansion
into new markets such as the Middle East, Russia, and Eastern Europe is expected.
Domestic market
Consumption capacity of the domestic market is as large as that of the export market; wood processing
businesses have neglected the domestic market. The demand for luxury wooden furniture, especially for
use in restaurants, hotels, resorts, apartments and offices, has been rising due to increased foreign
investment. In addition, the domestic real estate market's recovery and improved living standards have
also boosted furniture demand.
Furniture companies are expanding their chains by opening new stores in the country, even though the
domestic furniture market's sales growth is expected to fall. Although companies might face losses in the
beginning, the trend of opening big stores will continue as most of the companies plan to tap the domestic
market.
New pact with EU
Vietnamese and European officials are in for the first round of talks on voluntary partnership agreements
that focus on production and trade of processed wood products. The agreements are the means of putting
the EU Forest Law Enforcement, Governance and Trade (FLEGT) licensing scheme into effect. The pact
would open the door wider for timber products from Vietnam into the EU market. The goal is to assure
legality for timber products and compliance with the FLEGT agreement.
Support from Italy
The Italian government is supporting a three-year scheme to help improve the capacity and
competitiveness of Vietnamese small- and medium-sized enterprises (SMEs) in the wood processing
industry.
Key Players
Company name
Dai Chau JS Corp
Location
Status
Annual
Revenue
Hanoi
Listed
$ 20.6 M
Duc Thanh Wood processing Co
Ho Chi Minh City
Listed
$ 10.6 M
Thuan An Wood Processing JSC
Binh Duong
Listed
$ 21.9 M
Truong Thanh Furniture Corporation
Binh Duong
Listed
$145.2 M
Pleiku
Listed
$ 45.6 M
Corporation
Ho Chi Minh City
Listed
$ 22.4 M
Vinafor Saigon JCO
Ho Chi Minh City
Private
$ 8.59 M
Binh Duong
Private
$ 20.1 M
Binh Dinh
Private
$ 22 M
Latitude Tree International Limited
Binh Duong
MNC
$121.1 M
Prosper Joint Stock Company
Binh Duong
Private
$ 20.9 M
Ho Chi Minh City
Listed
$ 13.5 M
Duc Long Gia Lai Group
Savimex
Sang Shun Enterprise Company
Dai Thanh Furniture JSC
Minh Huu Lien JSC
Source: Onesource, Hoovers
Industry Outlook
Nearly two-thirds of Vietnam’s exports to the U.S. in 2011 were consumer products such as apparel,
footwear, furniture. Coordination among sectors and industrial groups is a key measure to help garment,
footwear and wood furniture businesses improve their chain value and competitiveness in both domestic
and foreign markets.
Furniture sector along with apparel, footwear and other low value-added manufacturing are no longer as
attractive for new FDI as in the past.
Hence, the State is encouraging to create favorable conditions for business and organizations to enter the
wood materials business and serve domestic production. Companies’ in wood business must have a
strategy to promote and distribute products in domestic market, to avoid dependence on a few markets to
limit the risks. Revitalized demand from traditional markets and growing popularity in new overseas
destinations are pushing the wooden and wicker furniture industry to become one of Vietnam's most
important export sectors.
The government's aim is to shift from commodity type products towards the manufacture of high added
value products. From the traditional operations as Original Equipment Manufacturer (OEM) and
mass-level production, many local and foreign companies are working their way up in the furniture
industry and moving to become Original Design Manufacturer (ODM) and developing their design
capabilities and enhancing long-term competitiveness further.
In order to improve product quality and enhance value add to their products, wood processors and
exporters would have to focus on human resource development, management and equipment investment
to turn out higher-quality products, instead of quantitative development as seen in the past. Hawa’s
member companies have suggested opening a company specializing in doing marketing, distributing and
building up distribution networks to improve the sales in domestic market.
In 2007, the government approved a new plan, the Vietnam forestry Development Strategy 2006-2020, in
which the need for importing raw materials will fall drastically.
Sector Events
Vietnam International Furniture and Home Accessories Fair –VIFA is being held every annually at the
Saigon Exhibition and Convention Center. It is one of the most well-known export furniture fairs in
Vietnam and the South East Asia. The first fair was started in 2008. The event showcases a wide selection
of indoor and outdoor furniture as well as a vast range of home accessories. This event is organized by
HAWA (Handicraft & Wood Industry Association of Ho Chi Minh City).
Ho Chi Minh City International Furniture and Handicrafts Fair is the biggest international specialized
trade fair, focusing on the high growth rates and export industry. The Fair also takes the images of
furniture and handicrafts of Vietnam to exhibitors through the latest and unique models, with diversified
and skillful design from many famous domestic manufacturers.
Besides that, all kinds of modern machinery equipment and materials for the wood processing will be
exhibited at this fair. It is the largest international furniture and handicrafts trade exhibition in Vietnam.
The Fair acts a one-stop Sourcing and business matching service center for international furniture
importers sourcing potential partners. It was held in Oct 2012 at Tan Binh Exhibition & Convention
Center (TBECC).
References
Factiva
Ministry of Industry and Trade - Vietnam
http://www.hawa.com.vn
http://www.vietnamwoodexpo.com/
http://vccinews.com/
http://www.vifafair.com
http://www.trade.hochiminhcity.gov.vn
http://www.furniture-vietnam.com
http://www.vietrade.gov.vn/
Analyst report – Mekong Securities
7th FLEGT annual coordination meeting - Presentation