Apple ‘is paying attention’ to Vietnam, looking for production locations outside of China
According to the Wall Street Journal, Apple is working to promote manufacturing operations outside of China. The driving force mainly comes from mainland China’s COVID-19 prevention policy – which forced many of Apple’s iPad, iPhone, and MacBook manufacturing partners in Shanghai to temporarily close factories.
Faced with that situation, Apple in April warned of a number of challenges in the current quarter, including some supply constraints in the context of China – a country with many large manufacturing centers. imposed the strictest lockdown measures ever. This is said to affect Apple’s revenue from $4 billion to $8 billion.
According to analysts, more than 90% of Apple products such as iPhones, iPads and MacBooks are being manufactured in China through 3rd parties. This huge dependence makes Apple can face many risks in ensure a stable supply.
Efforts to FIND SUPPLY OUTSIDE CHINA
Therefore, in the context of looking for production locations outside of China, Apple began to pay more attention to India and Vietnam. These are two countries that account for a small part of Apple’s global production capacity.
When asked to confirm the above information, an Apple representative declined to comment. Reportedly in April, sharing about Apple’s supply chain, CEO Tim Cook said: “Our supply chain is global, so products are made everywhere.” . The CEO also said that Apple is still “continuing to find ways to optimize that”.
Apple tries to find supplies outside of China
According to the Wall Street Journal, Apple began looking to diversify its manufacturing operations outside of China before the outbreak of COVID-19 in early 2020. Although the pandemic made this plan more difficult, until Today, Apple is continuing to push the target and encourage partners to improve production capacity.
“Challenges are inevitable, but we believe in our team, products, services and strategy,” said CEO Tim Cook.
The proof is that revenue from the smartphone product line reached $50.57 billion, up 5.5% year-on-year. This number surpassed even the forecast of $ 19.72 billion that data company Refinitiv made earlier.
In addition, revenue from services and other Apple products in the first quarter also increased by more than 17% and 12% respectively. These two numbers are not too different from experts’ expectations.
According to Tim Cook, one of the driving forces behind iPhone sales comes from a change in consumer mindset. They had an Android phone but decided to switch to an iPhone.
“We hit a record for the number of people upgrading their phones in the quarter. The number of users switching to iPhone also increased sharply,” said Tim Cook.
Apple has plenty of reasons to stick with China as a manufacturing hub
According to Ming-chi Kuo, a supply chain analyst at TF International Securities, many companies are also struggling to stabilize the tight supply. This is one of the driving forces that force supply chains to shift.
However, according to many experts, Apple has many reasons to stick with China as a manufacturing hub. This is because the workforce in the mainland is highly skilled and hired at low cost. In addition, the network of components suppliers is also quite diverse – something that Apple will hardly find in a country other than China for many years to come.
In fact, with the exception of India, the number of skilled workers in China is even larger than the population of many Asian countries. The local government has also previously cooperated with Apple and made sure its manufacturing partners have enough land, labor and raw materials for the production process.
Another advantage is that Apple can sell many devices made in China to Chinese users. China currently accounts for 20% of Apple’s global sales. The company’s four best-selling phones in January were also recorded in major cities in China.
China accounts for 20% of Apple’s global sales
“With the size of the domestic market and a strong manufacturing ecosystem, China will still lead the race and help companies like Apple improve their value added,” said a supply chain expert. .
ALTERNATIVE CHOICES
Some sources close to Apple said that Apple is considering India as a possible alternative to China. The reason is because India is densely populated, labor costs are cheap.
Currently, Foxconn Technology Group and Wistron Corp both have factories in India to produce iPhones for the domestic market. In April, Apple also announced that it was starting to produce the new generation of iPhone 13 in India.
Last year, India produced 3.1% of the iPhone in the market. This number is predicted to increase to 6% to 7% this year.
However, due to fear of geopolitical tensions between China and India, some manufacturers started to look for opportunities in Vietnam and some Southeast Asian countries. It is known that Vietnam shares a border with China and is currently one of the important production areas for Samsung.
Foxconn has a factory in India to produce iPhones for the domestic market
An Apple manufacturing partner, such as Luxshare Precision Industry Co, is manufacturing AirPods for Apple in Vietnam. A Luxshare representative said that some customers are worried about the risk of blockade orders and power shortages, so they push partners to expand production outside of China. This is part of a mass production effort to introduce new products (also known as NPI). During this phase, partners will convert design drawings into detailed production plans.
If successful, factories outside of China are more likely to develop into full-scale production hubs instead of copying existing models on the mainland. This process requires a lot from investors, especially in the period when the global economy is still not really stable.
According to: WSJ, CNBC
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