Updated February 2026 | China manufacturing analysis
An importer looks at their numbers:
China factory: $8.50 per unit
Vietnam factory: $7.00 per unit
Savings: $1.50 per unit
On 50,000 units per year: $75,000 saved.
Decision made. Move to Vietnam.
12 months later:
They're bleeding cash, fighting quality problems, and their China supplier won't take them back.
What happened?
They calculated unit cost.
They didn't calculate the real cost of leaving China.
When evaluating "exit China," most importers count:
Tooling and molds:
Sample development:
First production costs:
Total calculated cost: $50K-$150K
Payback period: 1-2 years based on $1.50/unit savings
Sounds reasonable.
It's wrong.
Here's what actually happens when you leave China:
Timeline reality:
That's 12 months minimum.
During those 12 months:
You're either:
Let's do the math:
If you do $2M in annual sales of this product:
Lost sales cost: $500K - $1M
Your $75K/year in unit cost savings?
Gone in the first 6 months of transition.
First production run in Vietnam:
Your China factory took 3 years to get quality stable.
Your Vietnam factory is starting from zero.
Typical first-run issues:
Let's do the math:
50,000 units at 12% defect rate = 6,000 defective units
Cost of defects:
Quality failure cost: $80K-$107K in first year
Your $75K annual savings?
Gone again.
China factory after 3 years:
Vietnam factory in year 1:
Time cost:
Your time (or your team's time) managing Vietnam supplier:
If your time is worth $100-200/hour: Communication overhead cost: $40K-$120K per year
Your $75K annual savings?
Gone a third time.
China lead time: 35-45 days
Vietnam lead time: 50-70 days (because they're still learning your product)
Longer lead time means:
Let's do the math:
$2M in annual sales = roughly $165K in monthly inventory
China: 45-day lead time = 1.5 months inventory buffer = $250K tied up
Vietnam: 65-day lead time = 2.2 months inventory buffer = $365K tied up
Additional capital tied up: $115K
If your cost of capital is 8-12%: Inventory carrying cost: $9K-$14K per year
Plus: Higher risk of stockouts (longer lead time = less flexibility)
Your China factory after 3 years:
That relationship has value:
When you leave:
That relationship capital = $0
Can't quantify it until you need it and don't have it.
Real cost:
Lost relationship capital cost: $20K-$80K per year in missed opportunities
China factory mistakes (years 1-3):
Vietnam factory mistakes (year 1-2):
Each mistake costs:
Typical year 1: 4-6 significant mistakes
Learning curve cost: $25K-$50K
China:
Vietnam:
Legal setup cost: $15K-$30K
Plus ongoing compliance risk if origin isn't properly verified.
Here's the one nobody thinks about:
When Vietnam doesn't work out, your China supplier won't take you back.
You told them you're moving to Vietnam.
You ended the relationship.
You took your tooling.
6 months later when Vietnam is failing:
You call your China factory: "Can we come back?"
Their response:
You burned the bridge.
Now you're stuck in Vietnam with failing production and no Plan B.
Cost of being stuck: unquantifiable, but potentially company-destroying
Let's add it up:
Year 1 costs of leaving China:
| Cost Category | Amount |
|---|---|
| Tooling/setup | $50K-$150K |
| Lost sales (transition) | $500K-$1M |
| Quality failures | $80K-$107K |
| Communication overhead | $40K-$120K |
| Additional inventory capital | $9K-$14K |
| Learning curve mistakes | $25K-$50K |
| Legal/compliance setup | $15K-$30K |
| TOTAL YEAR 1 | $719K - $1.471M |
Annual "savings" from lower unit cost: $75K
Net cost in year 1: -$644K to -$1.396M
Break-even timeline: 9-18 years
And that's assuming:
Month 1-3: "This is going great. Vietnam is so much cheaper."
Month 6: "We're having some quality issues, but they'll figure it out."
Month 9: "Communication is harder than we thought, but we're committed now."
Month 12: "We spent $800K transitioning and our product quality is worse than China. But we can't go back."
Month 18: "We're thinking about moving to India..."
And the cycle repeats.
It's not never.
Leaving China makes financial sense when:
Not broad tariffs. Specific AD/CVD or product category tariffs that:
Then: Vietnam/India savings might outweigh transition costs
Regulatory restrictions, capacity shifts, material unavailability
Then: You have no choice
No established supplier relationship to lose
No production stability to disrupt
Then: Start in Vietnam/India from the beginning
Quality collapsing, reliability gone, relationship broken
Then: You're not "leaving China" - you're leaving a bad supplier
Taiwan conflict, sanctions, trade war escalation creates unacceptable risk
Then: Diversification is insurance, not cost savings
But if you're leaving China purely because "Vietnam is cheaper per unit":
You're about to learn an expensive lesson.
They optimize China first.
Before spending $700K-$1.4M transitioning to Vietnam:
Legal tariff reduction through proper classification
Potential savings: 5-15% on landed cost
Cost: $3K-$8K for classification review
ROI: Immediate
After 3 years, you have leverage:
Potential savings: $30K-$80K per year
Cost: Negotiation time
Work with China factory to:
Potential savings: 5-10% on unit cost
Cost: Collaboration time
Start 1-2 products in Vietnam
Keep China as reliable base
Test Vietnam without betting everything
Cost: $50K-$100K for Vietnam setup
Benefit: Optionality without destroying what works
If you do all four:
You've saved $50K-$100K annually, built Vietnam optionality, and maintained China reliability.
Total cost: $60K-$120K
vs leaving China entirely: $700K-$1.4M in year 1
Leaving China isn't free.
The "cheaper unit cost" in Vietnam is real.
But it's not the total cost.
When you add:
Leaving China often costs MORE than staying and optimizing.
Especially in year 1.
The importers who win aren't the ones chasing the cheapest unit cost.
They're the ones calculating total cost of ownership.
And total cost of ownership in China - after 3 years of relationship building, quality refinement, and operational optimization - is often lower than Vietnam year 1-3.
Even with tariffs.
If you're considering leaving China:
Step 1: Calculate the REAL cost
Step 2: Optimize China first
Step 3: Build optionality, don't burn bridges
Step 4: Calculate total cost of ownership, not unit cost
Step 5: Make decisions based on 3-year total cost, not year 1 unit price
If staying in China and optimizing saves you more than leaving:
Stay.
Don't leave China because everyone else is panicking.
Leave China when the math actually works.
Q: What if tariffs on China keep increasing?
Then re-run the math. But remember: tariffs can change (Supreme Court just proved it). The costs of transitioning are real and permanent. Don't make irreversible supply chain decisions based on reversible tariff policy.
Q: Won't Vietnam quality eventually match China?
Eventually, maybe. But it takes 2-3 years minimum. And during those 2-3 years, you're paying the costs above. Plus: China quality didn't start good either - you spent years refining it. You'll spend years refining Vietnam too.
Q: What if my China supplier raises prices to offset tariffs?
Then negotiate. You have 3 years of relationship capital. They have invested tooling and systems for your product. Both sides lose if you leave. Most China suppliers will share tariff burden 30-50% rather than lose a 3-year client.
Q: Isn't staying in China risky given geopolitical tensions?
Yes. Which is why we recommend building Vietnam/India optionality while maintaining China. But "risky" doesn't mean "move everything immediately." It means "build backup options" - which costs $50K-$100K, not $700K-$1.4M.
Q: What if everyone else in my industry is leaving China?
Let them. If they're making decisions based on unit cost without calculating total cost, they're bleeding cash right now. You can gain competitive advantage by staying in China, optimizing costs, and maintaining reliable supply while competitors fight quality problems in Vietnam.