Thailand Manufacturing Compared to Vietnam: Where Should You Move Production?

For years, China has been the default destination for producing the majority of products thanks to its infrastructure, supply chain network, and overall manufacturing expertise. But with tariffs, rising costs, and growing geopolitical risks, many companies are reevaluating their reliance on China and looking for alternative supply chain options.

Two of the most frequently discussed alternatives are Thailand and Vietnam. Both countries have made significant progress in attracting foreign investment and building out their infrastructure. At the same time, it’s important to be transparent: neither Thailand nor Vietnam can fully replicate what China offers, and they aren’t even close. Supply chains in both countries still have gaps, and most manufacturers will continue to rely on China in some capacity.

That said, for certain products, Thailand manufacturing or production in Vietnam can be a smart part of a broader diversification strategy. In this article, we’ll compare the strengths and weaknesses of both countries, explore which types of products fit best, and provide guidance to help you determine whether moving your supply chain to Thailand or Vietnam makes sense for your business.

Why Companies Are Considering Alternatives to China

Over the past two decades, China has built the most robust manufacturing hotspot. For many companies, it was the obvious choice: low costs, reliable suppliers, and the ability to source nearly every component in one country. Of course, you get some horror stories with suppliers stealing IP, but I believe this will happen in any developing country (or even developed country). But recent developments have pushed manufacturers to reconsider putting all their supply chain eggs in one basket.

One major factor is tariffs. U.S.–China trade tensions have added significant costs for companies importing goods from China, especially in consumer electronics, hardware, and lifestyle products. For businesses that already operate on thin margins, even a small tariff increase can have a big impact on pricing and competitiveness.

Another driver is rising costs inside China itself. Labor rates have increased as the country’s economy has matured, and land, utilities, and compliance costs have all climbed. What was once the lowest-cost option is now far from it in certain industries.

On top of that, geopolitical uncertainty and supply chain risk are front of minds for these brands. COVID revealed how vulnerable a single supply chain can be, and companies are under pressure from boards and investors to build resilience by diversifying outside of China.

Still, it’s worth repeating: China is in a league of its own. Neither Thailand nor Vietnam offers the same depth of supplier networks or the same scale of infrastructure. For many businesses, diversification doesn’t mean replacing China; it means complementing it with additional production bases. This is where the China +1 Strategy comes from. 

Thailand Manufacturing Strengths and Weaknesses

When evaluating whether to move production to Thailand, it’s important to look beyond just labor costs. Thailand has carved out a reputation as one of Southeast Asia’s more advanced manufacturing hubs, supported by strong government incentives and a pretty skilled workforce. At the same time, the country faces limitations that may affect which types of products can be produced competitively.

Thailand Manufacturing Strengths

Thailand has long been recognized for its automotive and electronics industries, making it one of the more industrially sophisticated countries in the region. The Thai government, through the Board of Investment (BOI), actively supports foreign manufacturers with tax incentives, free trade agreements, and infrastructure development.

In addition to policy support, Thailand offers a skilled labor force suited for industries requiring precision and technical expertise, such as plastics, metals, and consumer electronics. Its logistics infrastructure, including Bangkok’s international airport and the deep-sea port at Laem Chabang, provides reliable access to global markets. For companies exporting to the U.S. or Europe, this connectivity can significantly reduce lead times compared to less developed regions.

Summary of Strengths:

• Strong base in automotive, electronics, and industrial manufacturing

• Government support through BOI incentives and trade agreements

• Skilled workforce for precision industries

• Well-developed logistics infrastructure (Bangkok, Laem Chabang)

Thailand Manufacturing Weaknesses

Despite these strengths, Thailand is not without challenges. Labor costs in Thailand are higher than in Vietnam (but still cheaper than China), making it less attractive for labor-intensive industries like textiles, footwear, or furniture. While the country offers skilled workers, the overall labor pool is smaller, which can pose scaling challenges for high-volume, low-margin products. Also, while we say the labor market is more skilled, it’s comparing that to China. The labor market in Thailand is considerably lower than what you’ll find in China. 

Additionally, Thailand’s supply chain is not nearly as deep as China’s. Many manufacturers still rely on importing raw materials or components from China, which can add time, cost, and complexity to the production process. These gaps mean Thailand works best for certain categories of products but not for mass-market, cost-sensitive goods.

Summary of Weaknesses:

• Higher labor costs compared to Vietnam

• Smaller workforce pool for large-scale production

• Ongoing reliance on imports for some raw materials and components

Vietnam Manufacturing Strengths and Weaknesses

Vietnam has quickly emerged as one of the most popular alternatives to China for manufacturing. Over the past decade, the country has attracted billions in foreign investment, driven by competitive labor costs, trade advantages, and a growing workforce. Still, Vietnam’s rapid rise comes with its own challenges, particularly when it comes to infrastructure and supply chain maturity.

Vietnam Manufacturing Strengths

Vietnam’s greatest appeal lies in its cost advantages. Labor remains significantly cheaper than in both China and Thailand, making it an attractive option for labor-intensive industries. This is one reason Vietnam has become a global hub for textiles, footwear, furniture, and basic consumer goods.

Beyond low costs, Vietnam has also benefited from a number of free trade agreements, including strong ties with the United States (at least for now) and the European Union. These agreements often provide tariff advantages compared to China, which can make a major difference in total landed costs.

The country is also seeing rapid growth in electronics assembly, with major brands investing in Vietnam to diversify their production base. Combined with its young, expanding workforce, Vietnam has the human capital needed to support further growth in export manufacturing.

Summary of Strengths:

• Competitive labor costs compared to China and Thailand

• Strong in textiles, footwear, furniture, and consumer goods

• Trade agreements providing tariff advantages

• Growing electronics assembly sector

• Young and expanding workforce

Vietnam Manufacturing Weaknesses

Despite the growth, Vietnam still faces infrastructure challenges. Congestion at ports, inconsistent power supply, and limited logistics capacity can create delays and increase costs. While the government is investing heavily in infrastructure, these gaps are still noticeable when compared to China or Thailand.

Another limitation is the immaturity of Vietnam’s supply chain. Many factories rely on importing raw materials, fabrics, or electronic components from China, reducing the benefits of shifting production. This dependence on imports can also expose manufacturers to the very risks they are trying to mitigate.

Finally, while labor is affordable, costs are rising quickly in key manufacturing hubs such as Ho Chi Minh City and Hanoi. Companies relying solely on Vietnam for ultra-low-cost production may find those advantages eroding over time.

Summary of Weaknesses:

• Infrastructure challenges (ports, power, logistics)

• High reliance on China for raw materials and components

• Rising labor costs in major cities

Limitations to Keep in Mind

Even though Thailand and Vietnam are often seen as the top alternatives to China, it’s important to set realistic expectations. Both countries are still building their manufacturing ecosystems, and neither can fully match what China already offers, but that is still ok. 

One of the biggest challenges is the supply chain depth. In both Thailand and Vietnam, many factories still import raw materials, subcomponents, or specialized parts from China. This dependency reduces the independence and resilience that companies often seek when diversifying. Relying on China will also lead to increased lead times because of the logistics time and perhaps additional export and import fees. 

Another factor is infrastructure maturity. While Thailand has stronger logistics than Vietnam, neither country has the same scale of ports, highways, and supporting services that China has developed over decades. These gaps can lead to longer lead times and higher logistics costs, especially for complex products that require multiple suppliers.

Companies should also be aware of workforce and training differences. Thailand’s workforce is skilled but smaller, while Vietnam’s workforce is larger but often less experienced in high-precision industries. Matching product requirements to local capabilities is critical to avoiding production bottlenecks.

Lastly, companies must look at the total landed cost, not just labor savings. Higher logistics costs, reliance on imported parts, and potential inefficiencies can offset the benefits of cheaper labor or tariff savings.

Key Limitations to Keep in Mind:

• Reliance on China for raw materials and subcomponents

• Infrastructure gaps compared to China

• Workforce differences in size vs. skill

• Higher logistics costs and longer lead times in some cases

• Landed cost can outweigh labor savings

Conclusion

Neither Thailand nor Vietnam is a perfect replacement for China, and it’s important for companies to understand this before deciding which country is right for them. Both countries have made impressive progress in attracting manufacturers, but their supply chains, infrastructure, and scale still fall short of what China offers.

That said, each has clear advantages for specific industries. Thailand's manufacturing is well-suited for more complex, precision-driven products, while Vietnam shines in labor-intensive, cost-sensitive goods. For many companies, the best approach isn’t choosing one over the other, but building a balanced strategy that leverages China alongside one or both of these alternatives.

Ultimately, the right decision depends on your product, cost structure, and long-term growth plans. If you’re exploring supply chain diversification and want to understand whether Thailand, Vietnam, or a multi-country strategy is the right fit, EPower can help guide you through the process and ensure you make a move that strengthens your overall supply chain. Reach out to us today.