Source confirms Foxconn shifting some Apple production to Vietnam

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Foxconn is now definitively planning to move some of its current China-based Apple assembly to Vietnam in a bid to minimise the impact of the ongoing US-China trade war.

This includes Apple’s iPad and MacBook products according to a Reuters report, citing an unidentified source said to have knowledge of the plans. Currently 100 per cent of Apple’s iconic iPad line are manufactured in China.

There is no indication of how much production will be shifted, nor did Foxconn confirm the report other than to say it doesn’t comment for “reasons of commercial sensitivity”.

“The move was requested by Apple,” Reuters quoted its source as saying. “It wants to diversify production following the trade war.”

Foxconn is said to be building the Apple iPad and MacBook assembly lines at its existing plant in Vietnam’s northeastern Bac Giang province, to come online in the first half of 2021, the source says.

Vietnam exim
Vietnam has climbed the ranks as a key electronics exporter, from a modest 47th place in 2001, to 12th place in 2019, according to Dezan Shira & Associates. Mobile phone exports were ranked second worldwide, with a value of over USS 50 billion in 2019. Among the key electronics manufacturers, located primarily outside of Hanoi, are Samsung, LG and Nintendo among others.

This latest news indicates Apple’s main contract electronics manufacturer is making good on the sentiment expressed at the height of tensions in Donald Trump’s trade war with China last year when the partners said they were considering shifting some of Apple’s production to Vietnam.

The impact of the tariffs was significant enough to drive a number of consumer electronics companies to divert shipments to Vietnam for re-export to the US, thus evading the punitive tariffs. Aside from problems resulting from the trade war, wages have also been steadily rising in China causing companies in a number of industries to reevaluate their manufacturing strategies.

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With the US President now spending his remaining weeks in the White House waging a war of damage and destruction after losing the November election to his Democratic rival, Trump has ramped up rhetoric against trade with China. This includes a continuing encouragement for US companies to move production out of China.

Having successfully inflicted near-mortal damage to Chinese electronics giant Huawei, maker of some of the world’s top 5G cellular equipment, along with popular cell phones, the US also targeted other made-in-China electronics for higher import tariffs and restricted exports of key components needed for hi-tech manufacturing in China.

A number of Taiwanese manufacturers have a strong presence in China and have made various statements and in some cases have moved to set up other production sites in countries such as Vietnam, Mexico, and India.

Tim Cook Foxconn
Apple CEO, Tim Cook, talks to one of the Foxconn workers during a previous visit to China.

Foxconn already has a number of facilities in India, including in the states of Andhra Pradesh and Tamil Nadu, where it assembles cell phones for brands Xiaomi and Nokia. For Apple, the Taiwanese company has iPhone assembly facilities in Bangalore and more recently it set up facilities in Chennai all-told seeing an ongoing USD 1.0 billion expansion.

Meanwhile, back in Vietnam, Foxconn, publicly announced earlier this week a USD 270 million investment to set up a new subsidiary called FuKang Technology Co Ltd. This, according to the Reuters source was aimed at supporting the Vietnam expansion.

The contract manufacturer also plans to make television sets at the Vietnam plant for clients including Japan’s Sony Corp, with the beginning of such production slated for late 2020 to early 2021, the source says. Other electronic products such as computer keyboards will be produced at the facility he adds.

Foxconn chairman Liu Young-way told investors last August that the US-China trade war had effectively split the world into two, and said his company aimed to provide “two sets of supply chains”.

Depending on the size of the shift, air cargo players may find themselves scrambling for available capacity, as Vietnam was already a tight market for freighter capacity prior to the Covid-19 crisis.

Other companies in China that assemble Apple’s iPad include Taiwan’s Compal Electronics Inc and China’s BYD Electronic International Co Ltd.

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