Apple’s suppliers in China hurry to move out manufacturing capacity; India among top choices apart from Vietnam

This preemptive action is likely to be taken by the suppliers to safeguard their interests.

GoerTek, the company that manufactures AirPods, is among the many manufacturers that are considering locations outside of China to produce electronic gadgets, including iPhones and PlayStations, the report said.

Deputy Chairman Kazuyoshi Yoshinaga stated that the company is investing an initial amount of $280 million in a new plant in Vietnam, and is contemplating expansion in India, said the Bloomberg report.

According to the executive, US technology firms are particularly pushing for manufacturers to explore alternative locations, it added.

The US-China conflict, which started with a trade war but now involves bans on chip and capital exchange, is forcing the electronics industry to reassess its longstanding supply chain. During the Covid Zero era, the world's dependence on China was apparent as the supply of products, including phones and cars, was disrupted due to Beijing's restrictions.

However, the US-based company has been cautious about any indications of reducing its investments in China. It has developed a vast ecosystem around companies like Foxconn Technology Group and GoerTek, which together provide employment to millions of people.

Apple's top nine out of ten crucial suppliers may be planning substantial moves to countries like India, enticed by incentives under Prime Minister Narendra Modi's 'Make in India' campaign. These developments are taking place behind the scenes, the report said.

India is in high demand among clients, which indicates its potential as both a market and a manufacturing hub.

“We get requests from our clients almost every month. ‘Do you have any plans to expand to India?’” Yoshinaga was quoted as saying by Bloomberg. “If they decide to build up the production lines in India, we may have to think about it seriously. Currently, we are focusing on developing our Vietnam production facilities.”

Currently, Vietnam is the only manufacturing location outside of China for the company. According to Yoshinaga, GoerTek plans to build a new complex in Bac Ninh, covering an area of 62 hectares, which will manufacture products for significant US brands.

The complex is expected to be operational within a year. This investment will add to the $1.06 billion that GoerTek has already committed to in Bac Ninh and Nghe An provinces in north-central Vietnam.

Yoshinaga stated that Vietnam's proximity to China, a network of ports along the coast, a young educated workforce, and political stability make it an ideal hub. However, he expressed concern about the anti-corruption campaign, which led to the dismissal of the president and two deputy prime ministers recently. According to Yoshinaga, the campaign is causing anxiety, and he has conveyed his concern to officials, according to the report.

Amid the political turmoil, at least for now, Vietnam remains an attractive hub for manufacturers.

There are indications that Apple is considering making the country a manufacturing hub for products such as AirPods, iPads, and MacBooks. Currently, GoerTek and Luxshare Precision Industry Co., both Chinese companies, dominate AirPods orders. Luxshare also has a complex in northern Vietnam.

According to Yoshinaga, many US companies are planning to shift production to Vietnam, irrespective of the cost. Some companies, like Jabil, are also exploring the possibility of expanding to India. However, he believes that in general, the trend will be to move production away from China, said the Bloomberg report.