Foxconn to shift some Apple production to Vietnam to minimise China risk
At the request of Apple Inc., Foxconn is moving the production of iPads and MacBooks from China to Vietnam, allegedly to mitigate the risks presented by China and the Sino-US trade war. Apple is seeking to diversify its production and move a significant portion of its overseas assembly from China to other capable countries. The development comes amid a country-wide push to shift production out of China, as well as to cease the use of Huawei equipment.
Taiwanese manufacturers are also seemingly following suit, moving some production from China to Vietnam, Mexico, and India to avoid the risks of external involvement in a trade war. Foxconn is currently building assembly lines for both its MacBook laptop and iPad tablet in the Bac Giang province of Vietnam. It is unclear the extent to which the production of Apple products will be shifted out of China.
Additional Context: This trend of economic decoupling is may have started because of US government sanctions, but now has momentum driven by increased awareness of risks in having too much dependency on Chinese based supply chains. Countries that stand to gain from more manufacturing include India, Mexico, Vietnam, Malaysia. Additionally, advanced automation for manufacturing is making it more economical to build highly automated manufacturing capabilities in countries that have seen loss of manufacturing share over the past 3 decades including the US, Japan and Republic of Korea.
One year ago OODA provided insights based on research and our global market experience in a piece titled Your Strategy for This Phase of the Trade War. The recommendations in that report still hold true today. Recommendations for all businesses (both product and services firms) in this report included:
- Analyze your technology dependencies. Who do you license software from? Who does your support come from? Analyze whether or not support will suffer as the trade war heats up.
- Know your supply chain dependencies. What parts of your supply chain will be impacted by the gathering storm? Will small businesses that serve you be under pressure because of the trade war? Will any be bought by larger firms? Will they be bought by overseas firms? Will investors supplying cash to your supply chain be under pressure? Will it cause an impact on your technologies?
- If you sell technology or tech related services (don’t we all?) analyze your markets carefully. Now is a great time to review and decide whether you should diversify into other markets, withdraw from markets where you have less hope of dominance, or focus on markets where you have a greater chance of significant growth. A key market to consider is the U.S. federal government (see our special reporting for Tech CEOs seeking to grow in the federal market).
- Continuously track the coming sanctions beyond tariffs. This includes restrictions on doing business in certain markets (we will track the technological related restrictions as we can and will provide our context here).
For more read the continuously updated China Threat Brief. Also see our special report on Your Strategy for This Phase of the Trade War – The short version is, stay agile! Also see our special report on What You Should Know About China’s “Destructive Warfare” Doctrine.