Apple wants to increase production in Vietnam

Vietnam and India, two countries that account for a small proportion of Apple’s manufacturing activities, are among the countries that receive more attention from Apple. Currently, more than 90% of its products such as iPhone, iPad and MacBook are made in China. The dependence of the “new apple” on China is a potential risk because of the US-China conflict and the Beijing government.

Any move by Apple, the largest US company by market capitalization, to shift production away from China could influence the thinking of other Western companies. This was especially prominent this year after Beijing refused to punish Russia for the war in Ukraine and implemented a blockade in some cities to combat the epidemic.

An Apple spokesperson declined to comment. As for CEO Tim Cook, when asked about Apple’s supply chain in April, he said: “Our supply chain is truly global, so products are made everywhere. We keep looking for ways to optimize“.

Apple wanted to diversify before Covid-19 raged around the world in early 2020, but efforts became more complicated because of the epidemic. The Cupertino company is once again urging and asking contractors to find a location to build a new facility.

Lockdowns in Shanghai and other cities in the country have caused supply chain bottlenecks for many foreign companies. Apple warned that the Covid-19 wave will cost about 8 billion USD this quarter. The travel bans mean that Apple has had to reduce the frequency of sending executives and engineers to China over the past two years, making it difficult to inspect production facilities directly. Last year’s power failure also affected China’s reputation.

Although many Western businesses face similar problems in China, Apple’s size gives them an advantage when negotiating with contractors, according to analyst Ming Chi Kuo. “Only a company like Apple can pressure to shift the supply chain like that,” he commented.

However, industry insiders say there are many reasons Apple is keeping China as its manufacturing hub: a well-trained workforce, low costs compared to the US, a deep network of suppliers that are difficult to find. repeat elsewhere. With the exception of India, the number of skilled workers in the Mainland even exceeds the population of many other countries in Asia. Local authorities also work closely with Apple to ensure contractors are supported with land, workers, and supplies.

Chinese Premier Li Keqiang said on May 19 that Beijing wants to be a “hot spot” for foreign investment and will work with foreign companies to ensure their regulations do not fluctuate drastically.

Another advantage is that Apple can sell many phones and computers “made in China” to people in the country. China accounts for about one-fifth of global sales of “missing apples”. Earlier this year, Mr. Cook revealed that the four best-selling phones in urban China were the iPhone.

As such, given the size of its domestic market and its strong manufacturing ecosystem, China will always be at the top of the list for companies like Apple. According to the Wall Street Journal, Apple considers India to be the country closest to China’s status thanks to its large population and low cost. Foxconn and Wistron both already have iPhone factories in India. But the problem is that Chinese assembly companies find it difficult to build factories here because of strained relations between New Delhi and Beijing.

For that reason, Apple’s Chinese contractors are looking to Vietnam and other Southeast Asian countries. Vietnam borders China and is a manufacturing hub for Samsung. Luxshare also manufactures AirPods for Apple in Vietnam.

In a phone call with investors, Luxshare said that its customers are concerned about power supply and epidemics – two challenges that China is facing. These clients want partners to look outside of China when doing new product introduction (NPI) work. During the NPI phase, a contractor converts a firm’s drawings and product prototypes into a detailed production plan.

A source from The Wall Street Journal said that Apple informed its manufacturing partner that it wanted to do more NPI outside of China. If that happens, non-Chinese production sites will be able to develop into full-fledged production sites instead of just copying plans developed in the Mainland. Such steps require major investment from suppliers, which is not easy at this time when the global economic outlook is clouded by high commodity prices, the war in Ukraine and shaking in the stock market. .

Cash is essential in times of uncertainty, a contractor official said, but suppliers have to go where Apple is going if they want to keep their jobs.

According to WSJ