For light, valuable goods freight is often under 1% of value, so location follows wages; parts, skills and customers then hold the plant in place.
The video builds the intuition; sources and limits are set out in the article. English- and Japanese-captioned versions of the vertical film are still on the to-do list.
For light, valuable goods such as shoes and clothing, container sea freight is often less than 1% of the goods’ value (average spot rates from Shanghai to Europe and the US west coast, 2010–2019). If freight costs so little, moving a plant further away adds little on the road, and location is decided mainly by wages. The monthly base wage of a factory operator at Japanese-owned plants is about 629 US dollars in China and 302 in Vietnam, roughly 2.08 times. Nike’s contract footwear output fell in China from about 35% in FY2007 to 17% in FY2025 and rose in Vietnam from about 31% to 51%; most of Vietnam’s gain came before the 2018 trade war.
Behind this is Weber’s labour-cost orientation. In the film’s illustrative example, the cheapest-freight site costs 260 a year (freight 100 plus labour 160); a low-wage site adds 40 in freight but saves 60 in labour, for 240, so moving pays. The ring where extra freight exactly equals the wage saving is the critical isodapane, and every low-wage site inside it is worth moving to. Halve the freight and the extra freight halves too, so the ring widens and many more places qualify. Industries for which transport cost is relatively unimportant are called footloose.
But the plant does not go far:
- Productivity cancels much of the wage gap. Output per worker in China is about 1.80 times Vietnam’s (APO 2023, whole-economy average), so labour cost per unit is roughly only 15% higher.
- The parts are still in China. In 2025 Vietnam imported about 186 billion US dollars from China, and its deficit with China grew faster than its surplus with the United States. Vietnam borders China, so moving there keeps the plant close to its parts.
- High-tech plants weigh customers, clusters and skills; the head of TSMC’s Kumamoto plant gave proximity to customers as the first reason.
Caveats: freight looks cheap largely because goods have become lighter and more valuable; ocean freight as a share of value has hardly fallen in decades (Hummels 2007), and freight per kilogram has risen since 2002 (OECD). Wages (market exchange rates) and productivity (purchasing power parity) are measured differently, so 15% is a rough figure.
Japanese classroom version (16:9)
A slower Japanese 16:9 version paced for a lecture, in two parts, with the full derivation, worked numbers and review questions.
Sources: Rodrigue (after OECD 2005); JETRO survey of Japanese affiliates, 2025; Nike 10-K; APO Productivity Databook 2025; General Statistics Office of Vietnam; Hummels (2007); Weber (1909).