— This is the script of CNBC’s news report for China’s CCTV on August 25, 2021, Wednesday.

Statistics between 2013 and 2019 show that Vietnam is the world’s third-largest footwear producer behind China and India. It is also one of the top 5 exporters for apparel. For some brands, Vietnam is particularly important in the supply chain. 28% of Adidas’ products are made in Vietnam. In the 2020 fiscal year, almost half of Nike shoes were supplied by contract factories in Vietnam. However, three suppliers halted production in mid-July. S&P Global Market Intelligence warned on July 19 that Nike might run out of sneakers made in Vietnam.

Now is the back-to-school season and demand for footwear and apparel is very high. According to a Wall Street Journal report, Dolce Vita, a footwear brand under Steven Madden, is seeing huge demand for one particular model amongst students, thanks to videos trending on TikTok. But some of Dolce Vita’s factories in Vietnam are closed at the moment.

Production disruption like this could incur direct losses for brands. Adidas said earlier this month that the majority of the production capacity in its Vietnamese suppliers has been idled since mid-July. It could lead to up to $600 million of lost sales for the second half of the year. Adidas said supply disruptions mean it can’t meet the strong demand and is considering raising prices.

At the same time, some international firms are adjusting their supply chains. Due to geopolitical risks such as the trade wars, some companies moved to manufacture away from China to other countries such as Vietnam. But now, the pandemic is prompting some to move back to China in order to mitigate supply risks Wolverine World Wide Inc, an American footwear company, has already shifted some production capacity back to China this year, according to a Wall Street Journal report. An executive of the company said that the supply in Vietnam is “really choppy”.

Andy Ho

Managing Director And Chief Investment Officer At Vinacapital

“The concern right now for everyone’s how to access the vaccine. And it takes time. I think Vietnam is in a situation and I think over the next one to three months, vaccines will come in, and then more get vaccinated. And hopefully, we’ll get back to normal probably late this year, early next year.”

So far 2% of the population are fully vaccinated. Over 80 footwear and apparel companies, including Nike and Gap, wrote a letter to U.S. President Biden in mid-August and asked the U.S. to accelerate vaccine donations to Vietnam. News just came in that Cuba is going to provide vaccines and transfer technology to Vietnam. Officials in Vietnam acknowledged issues with the current Covid-19 control measures, and they are looking to adjust their strategy. We will keep an eye on how the new measures can ease production disruptions.