Why it issues: Like many shopper electronics corporations, Apple has lengthy had the problem of over-dependence on China for a course of it calls FATP — Final Assembly, Test, and Pack. This 12 months, the Cupertino firm has elevated its effort to shift manufacturing to different Asian nations reminiscent of Vietnam, the place it needs to make iPads, AirPods, MacBooks, and probably even HomePods.
Over the previous few years, a number of tech corporations have been making an attempt to maneuver a few of their manufacturing exterior of China. Reshoring has confirmed a significant problem, so most corporations have opted to take manufacturing capability to neighboring Asian nations as an alternative.
That course of hasn’t been with out its personal set of challenges, particularly within the case of nations like Vietnam. Factory lockdowns over the previous two years and a extreme lack of native engineering expertise have slowed issues significantly. Suppliers like Foxconn have repeatedly referred to as for the diversification of the tech provide chain within the face of accelerating geopolitical and commerce tensions.
For Apple, some iPhone manufacturing has already moved to India. And in keeping with a Nikkei report, the Cupertino big is presently in talks to make some Apple Watch and MacBook merchandise in Vietnam to additional scale back its reliance on Chinese manufacturing. Suppliers like Luxshare and Foxconn will quickly arrange take a look at manufacturing traces for these gadgets within the Southeast Asian nation. Apple additionally hopes to maneuver HomePod manufacturing to the nation, however it is not thought of a precedence as the general progress has been gradual.
Apple already makes AirPods within the nation and has been doing so since 2020. Earlier this 12 months, it began making iPads in Vietnam because of BYD Electronics, however this was after a number of delays associated to chips and element shortages that solely lately began to ameliorate. It’s value noting that BYD is a Chinese provider, which highlights the hassle to steadiness the geopolitical impression of those strikes.
For Vietnam, this growth is a boon for the native tech trade. Newer MacBook fashions are far more modular, which has made it simpler for suppliers like Foxconn to maneuver manufacturing exterior of China because the meeting course of requires fewer and easier steps. By distinction, the Apple Watch has a comparatively difficult design that requires extra expert employees for the meeting course of. Both gadgets price extra to assemble in Vietnam, however it’s not but clear if this added price will replicate within the sticker worth.
Other corporations like Google, Amazon, and Dell have additionally arrange manufacturing traces in Vietnam, however the native provide chain remains to be weaker and fewer price-competitive than that of China. As of writing, Apple has 22 Vietnamese suppliers, up from the 14 it had in 2018.
Masthead credit score: Julian O’Hayan