Vietnam’s textile and garment industry is entering the final quarter of 2026 under growing pressure from volatile material prices, tighter margins and uncertain demand in its principal export markets.
The sector must also respond to stricter expectations concerning product origin, environmental performance, emissions, social responsibility and supply-chain traceability. Together, these requirements are changing how international brands evaluate manufacturers and select long-term sourcing partners.
Vietnam’s textile and garment exports reached approximately US$26.9 billion during the first eight months of 2026, increasing by 1.6% compared with the same period of 2025. The relatively modest growth illustrates the difficulty of maintaining export momentum in a challenging international market.
Cao Hữu Hiếu, chief executive of the Vietnam National Textile and Garment Group (Vinatex), warned that the final months of the year would continue to carry considerable risks.
Cotton and fibre prices remain volatile, while movements in the Vietnamese đồng against the US dollar could affect export profitability. Rising logistics, raw-material and auxiliary-material costs are also placing further pressure on already narrow margins.
Demand in the United States and Europe remains uncertain, while Vietnamese manufacturers face strong price competition from Bangladesh, China and other major sourcing countries.
Global Brands Introduce a New Supplier Filter
Competitive pricing and reliable manufacturing remain important, but they are no longer sufficient to secure a supplier’s position within an international fashion value chain.
Alen Wei, chief financial officer of H&M Production in China and Southeast Asia, said global brands increasingly require supply chains that are sustainable, innovative, resilient and capable of generating long-term value.
Vietnam is already an important sourcing base for H&M. The fashion group works with more than 40 suppliers and over 70 factories in the country, collectively employing approximately 60,000 people.
According to Wei, three areas will play a particularly important role in the industry’s next phase: sustainability, renewable energy and industrial upgrading.
These priorities are becoming part of the basic criteria used to assess suppliers rather than optional initiatives adopted by a limited number of leading companies.
International buyers increasingly want detailed information about where raw materials originate, which factories participate in production, what environmental and labour standards are applied and how the information can be verified.
This creates a new competitive filter for Vietnam’s textile industry. Companies that cannot provide reliable origin and production data may find it more difficult to enter regulated markets or maintain relationships with major international customers.
The issue has become more sensitive as countries strengthen rules of origin, trade-remedy measures and controls intended to prevent forced labour or the circumvention of import restrictions.
Vietnam’s extensive participation in free trade agreements provides important market access. However, manufacturers can only fully benefit from preferential tariffs when products meet the relevant origin requirements.
The country’s continued dependence on imported fabric and other textile inputs therefore remains a strategic weakness.
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AI and Digital Traceability Move Beyond the Technology Department
Traceability has traditionally depended on paper documents, separate databases and time-consuming manual inspections.
Digital platforms, connected sensors and artificial intelligence now allow manufacturers to follow materials and production stages more closely, identify irregularities earlier and provide compliance evidence when requested by customers.
Rajkishore Nayak, a professor specialising in fashion enterprise management at RMIT University Vietnam, said reliable traceability data could help distinguish Vietnamese suppliers from competitors.
Companies that can demonstrate material origins, production processes and compliance performance are more likely to maintain long-term customer relationships and enter market segments with higher requirements.
Connected data can also deliver operational benefits beyond compliance. Manufacturers can use it to improve material planning, reduce production waste, monitor energy consumption and strengthen quality control.
Artificial intelligence can support fabric and garment inspection, production scheduling, demand forecasting and the detection of unusual data or process deviations.
Technology should therefore not be viewed only as an investment for technical departments. When properly integrated into management systems, it can directly improve cost control, delivery performance and customer confidence.
Vinatex is accelerating the development of a management dashboard that will consolidate and standardise operational data across the group. The system is intended to provide management with better oversight and support scenario planning for 2027.
For its yarn operations, Vinatex has instructed member companies to monitor cotton and fibre prices closely and remain cautious when purchasing raw materials.
Garment units are expected to review low-efficiency products and customers, coordinate available production capacity, retain strategic customers and prepare their workforce and resources for the coming year.
The priority is not simply to increase production volume but to protect cash flow, productivity and profit margins.
Local Materials and Clean Energy Could Retain More Value
Vietnam remains one of the world’s largest textile and garment exporters, but much of the industry continues to focus on cut-and-sew manufacturing using imported materials.
Expanding domestic fabric production would allow the country to retain more value while improving its ability to meet the origin rules included in free trade agreements.
This transition will require investment in spinning, weaving, knitting, dyeing and finishing, alongside stronger environmental management. Building upstream capacity without cleaner production systems could create new energy, water and pollution challenges.
Renewable electricity will therefore play an increasingly important role in future investment and supplier selection.
A stable supply of renewable electricity at commercially viable prices could help factories reduce emissions and exposure to energy-cost volatility. The direct power purchase agreement mechanism, equipment electrification and energy-efficiency improvements could support this transition.
Production waste offers another opportunity. Fabric offcuts, yarn residues and other clean manufacturing waste can be reused, upcycled or recycled where suitable collection and separation systems are available.
Combining circular material management with digital traceability would allow companies to demonstrate how waste is collected and reused while reducing their consumption of virgin materials.
The key challenge is to prevent sustainability from being treated solely as an additional compliance cost. When clean energy, resource efficiency, traceability and automation are developed together, they can lower operating costs and improve market access.
Vietnam’s textile and garment industry has spent more than two decades building manufacturing scale, technical capability and international relationships. Its next stage will depend on whether it can convert these strengths into greater domestic value creation.
For the remainder of 2026, companies must protect margins and operational efficiency. Over the longer term, however, localisation, renewable energy, digital traceability and artificial intelligence will increasingly determine which suppliers move beyond price-based competition and secure a stronger position in the global textile value chain.
