Apple’s Chinese suppliers are likely to move their production capacity out of the country much faster than many observers expect to avoid fallout from escalating tensions between Beijing and Washington, according to one of the US company’s most important partners.
GoerTek, maker of the AirPods, is one of several manufacturers exploring locations outside of China, which today supplies the world’s largest portion of the world’s iPhone and PlayStation accessories.
Vice Chairman Kazuyoshi Yoshinaga said in an interview that the company is investing an initial $280 million in a new factory in Vietnam while considering expansion in India. He pointed out that American technology companies in particular were pressing hard for manufacturers of accessories for their devices, such as GoerTek, to move their equipment to alternative locations, according to Bloomberg, and Al Arabiya.net viewed it.
Yoshinaga added that starting last month, the dominant question from the company’s customers was about when to get out of China.
This comes after the conflict between the United States and China, which began with a trade war, has widened to include a blanket ban on the exchange of chips and capital, and prompted a rethink of the decades-old supply chain for the electronics industry.
Behind the scenes, 9 out of 10 of Apple’s most important suppliers may be preparing for large-scale moves to countries like India, providing incentives to push Prime Minister Narendra Modi’s “Make in India” initiative.
Bloomberg Intelligence estimates that it may take 8 years to move only 10% of Apple’s capacity outside of China.
Vietnam is currently GoerTek’s only manufacturing location outside of China. Yoshinaga said the new 62-hectare complex in Bac Ninh will manufacture products for major American brands and is expected to start operating within a year.
Yoshinaga said his company, which also plans to manufacture virtual reality headsets in Vietnam from 2024, expects the Southeast Asian country to produce more than half of its global revenue in three years, up from a third now.
He added that the company is also asking its suppliers to explore northern Vietnam for new factories. It makes Quest virtual reality headsets for Meta Platforms, and PSVR devices for Sony Group.
He pointed out that GoerTek had established its operations in Vietnam a decade ago to manufacture audio devices at the request of Samsung Electronics.
He said that Vietnam’s proximity to China, a coastal network of ports, a young, educated workforce, and relative political stability make the Southeast Asian country an ideal manufacturing hub, with the company currently employing about 40,000 workers in its factories in China. But Yoshinaga sees the anti-corruption campaign, which led to the recent dismissal of the president and two deputy prime ministers, as worrying.
For now, Vietnam remains an attractive location. Apple may be looking to make the country a manufacturing hub for the AirPods, iPads and MacBooks.
Yoshinaga said many US companies plan to move production there, regardless of the cost. Others such as Jabil Inc. They think of India. But in general, the flow will always be outward from China, he said. “I don’t think he’ll come back. It’s One Direction,” he said.
