Apple contract manufacturer Foxconn is reportedly moving some iPad and MacBook assembly lines to Vietnam from China. The iPhone maker has been reducing its dependence on Chinese assembly units since the US started a trade war with the Asian country last year. It has also started assembling flagship iPhone models in India to limit exposure.
Now, Reuters is reporting that Foxconn is moving production to Vietnam at the request of Apple. The report notes that Apple is looking to diversify production and minimize the impact of the ongoing trade war.
Apple moves production out of China
This is not the first time that an US firm has begun moving production outside of China. Last year, Nikkei reported that Google will move its Pixel smartphone production to Vietnam. The outgoing US administration led by President Donald Trump has encouraged US companies to shift production out of China.
The move is not only meant to appease the Trump administration but also to avoid tariff. Apple CEO Tim Cook had to personally speak with Trump to avoid tariffs on its core products made in China. In the past two years, the US administration has imposed higher import duties on electronics made in China. It has also restricted Chinese companies from supplying components made using US technology.
The report notes that Taiwanese manufacturers are now considering moving some production to countries such as Vietnam, India and Mexico. The move will help contract manufacturers avoid tariffs imposed by both the nations. Foxconn is reportedly building assembly lines for Apple iPad and MacBook at its plant in Vietnam’s northeastern Bac Giang province.
A person familiar with the development told Reuters that this assembly line will be online in the first half of 2021. The lines will take some production from China but it is not clear what percentage of production is being moved. “The move was requested by Apple,” the person told Reuters. “It wants to diversify production following the trade war.”
“As a matter of company policy, and for reasons of commercial sensitivity, we do not comment on any aspect of our work for any customer or their products,” Foxconn told Reuters in a statement.
Foxconn, officially known as Hon Hai Precision Industry Co Ltd, is one of the major contract manufacturers for Apple and other consumer electronics companies. On Tuesday, it announced an investment of $270 million to set up a new subsidiary called FuKang Technology Co Ltd. This could be a way to expand the Vietnamese manufacturing plants.
In addition to Apple, the contract manufacturer is also said to be planning to make televisions for Sony at the Vietnam plant. It will also make other electronics products such as computer keyboards. Taipei-based research group TrendForce notes that all iPads are currently assembled in China. The move would mark the first time that Apple iPad is being assembled outside China since its launch. While contract manufacturers are moving production outside China, analysts believe it will be several years before the reliance on China comes down.
Foxconn also plans to spend up to $1 billion to expand its iPhone assembly plant in India. While Apple has a small market share in India, it could use the plant for exports to other markets. Another report from Reuters noted that India’s “tight control of quality clearances” for products imported from China has slowed the import of new Apple devices.
Pegatron, another contract manufacturer is also said to be planning to set up an assembly unit in Mexico. Taiwan’s Compal Electronics Inc and China’s BYD Electronic International Co Ltd are other iPad assemblers.
It is not clear how the incoming administration of US President-elect Joe Biden will deal with China. For now, it is clear that companies with exposure to China, like Apple, will continue to move production to other countries. Contract manufacturers, on the other hand, are expected to keep assembly units in multiple countries.