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Apple delays plans to diversify supply chain from China to Vietnam

Apple has delayed plans to diversify supply chain from China to Vietnam

Apple has put on hold its plans to relocate part of its production including iPad and MacBooks from China to Vietnam due to the COVID-19 pandemic.

A new report by Nikkei Asia says that AirPods 3 have entered into mass production in China instead of Vietnam as Apple originally hoped. Apple’s plan to bring some MacBook and iPad production to Vietnam has also been put on hold due to a lack of engineering resources, an incomplete notebook computer supply chain, and the dynamic COVID-19 situation.

AirPods have been predominantly manufactured in Vietnam since the first model, thanks to Apple’s cooperation with Inventec. However, it appears that the upcoming model will be made in China at first, with the possibility of adding Vietnam-based production in the future. According to Nikkei, around 20 per cent of new AirPods production will eventually come from Vietnam facilities.

As the trade war between the United States and China escalated under the Trump administration in 2018, several IT businesses began to diversify their supply chain and seek alternative manufacturing destinations. In late 2020, Apple is rumoured to have asked Foxconn to diversify iPad and MacBook production.

However, those plans have stalled due to an insufficient supply chain of components, a lack of workers, and ongoing COVID-19-related shutdowns. Some experts see that these delays are likely to be temporary as Vietnam has established itself as an alternative manufacturing destination to China.

Reza Akbari, senior programme manager and senior lecturer of Logistics and Supply Chain Management at RMIT University said, “Apple’s supply chain is in search to reduce its over-reliance on China in the aftermath of COVID-19 and Vietnam has significant potential for growth as a global centre for manufacturing with the opportunities brought by its new-generation free trade agreements.”

Meanwhile, many leading electronic giants like Canon, Samsung, LG, Panasonic, and Intel have built high-tech electronic production bases in Vietnam, which have consecutively attracted other players.

Indeed, many suppliers of Apple have ramped up their presence in Vietnam over the past few years including Compal Electronics in Vinh Phuc province, GoerTek in Bac Ninh province, as well as Foxconn and Luxshare in Bac Giang province.

In June, Pegatron, another major Apple manufacturer, also got the nod from Taiwan to inject an additional $101 million into its investment in Vietnam. The move follows Pegatron’s earlier announcement to invest up to $1 billion in Vietnam.

Therefore, it is a matter time for these suppliers to expand operations once Vietnam contains the pandemic. In this scenario, it is expected that Apple would accelerate its diversification plans to Vietnam.

VIR