Apple shifts more of its operations out of China and into Vietnam to diversify its production

Apple is allegedly shifting more of its operations out of China and into Vietnam to diversify its production, bolstering Vietnam’s bid to become the world’s factory.

After the AirPods wireless earphones, the iPad is likely to become the second line of Apple goods to be built in Vietnam, and the decision comes after supply lines were affected by severe COVID-19 lockdowns in and around Shanghai. According to Nikkei Asia, Apple collaborated with BYD, a Chinese assembly business, to create iPad manufacturing lines in Vietnam, which will go into production soon.

Apple has long pondered producing iPads outside of China, but the idea was put on hold last year when a huge outbreak of the delta strain in Vietnam effectively shut down the country. Except for masks, life in the nation has returned to normal, despite China’s COVID-zero policy, which has resulted in several shutdowns. Pegatron, a Taiwanese company that makes products for IT giants like Microsoft, Apple, and Sony, as well as Foxconn, are expanding operations in Vietnam.

The change began a few years ago as Chinese labor prices began to rise, and it intensified as a result of the trade battle between the United States and China. China’s zero-COVID policy, which enforced devastating shutdowns this year, has highlighted the benefits of diversity.

According to Sian Fenner, chief Asia economist at Oxford Economics, Vietnam is the best-positioned economy in South-East Asia to gain from this trend. The Biden administration is also touting the advantages of firms relocating operations to countries that have excellent relations with the United States.

Last month, Treasury Secretary Janet Yellen urged for “friend-shoring” of supply chains “to a broader number of trustworthy nations for a range of products, so we can continue to securely increase market access, with reduced risks to our economy and our trading partners’ economies.”

Vietnam is doing everything it can to entice American investors, with Prime Minister Pham Minh Chinh vowing to make the process as easy as possible for anyone considering relocating there. Mr. Chinh promised to “fully answer” investors’ worries during a recent meeting on the sidelines of the US-ASEAN summit in Washington with top US corporations such as Google, UPS, Blackstone, GGV Capital, and Ford Motors.

Hanoi sees foreign investment projects as critical to Vietnam’s growth and is eager to expand beyond the garment manufacturing base dominated by Nike and Adidas, as well as other brands, into high-end electronics, renewable energy, and electronic vehicles. Shanghai, China’s financial hub and home to 25 million people was released from one of the world’s most stringent pandemic lockdowns this week. The country’s economy has taken a significant hit as a result of the two-month shutdown, which halted industry activities and output.

Economists predict top Southeast Asian nations to expand faster than China this year for the first time in 30 years. According to Maybank analysts, the ASEAN-6 economies’ GDP would rise by 4.9 percent in 2022, compared to China’s 4.5 percent. If Singapore is excluded from the COVID recovery, Indonesia, Malaysia, the Philippines, Thailand, and Vietnam are expected to increase at a combined rate of 5.2 percent.

Source: Financial Review