Electronics

Multiple sources familiar with Apple's layout revealed that the company is negotiating the production of Apple Watch and MacBook for the first time in Vietnam, marking the first time Vietnam will welcome local manufacturing of Apple Watch and MacBook, and Apple also hopes to diversify production locations.

Three people with direct knowledge of the matter told Nikkei Asia that Apple suppliers Luxshare Precision and Foxconn have started trial production of the Apple Watch in northern Vietnam, with the goal of producing the device outside of China for the first time.

Vietnam is already Apple's most important production center outside of China, making various flagship products for the U.S. company, including iPad tablets and AirPods headphones.

According to industry experts, the Apple Watch is more complicated because many components are assembled into a small case, which requires high technical skills. It also means that Vietnam has made significant strides in trying to further upgrade its tech manufacturing industry.

Due to the epidemic in mainland China, Apple also continued to transfer iPad production to Vietnam. Sources told Nikkei Asia that Foxconn is now helping Vietnam make more iPads as well. Apple is also in talks with suppliers to build a test line for its HomePod in Vietnam, the people said.

For MacBooks, Apple has asked suppliers to build a test line in Vietnam, two sources said.

However, the move of mass production to the country has been slow, in part because of the pandemic, but also because laptop production involves a larger supply chain, multiple sources said. They added that the manufacturing network is currently China-centric and extremely cost-competitive.

A person with direct knowledge of the situation said: "AirPods, Apple Watch, HomePod, etc... In addition to iPhone manufacturing, Apple has big plans in Vietnam, MacBook components are more modular than in the past, which makes notebook production outside China. Computers have become easier. But how to make them cost-competitive is another challenge.”

Apple’s diversification in Vietnam started with AirPods, which went into mass production in Vietnam in 2020. The move marks a change in the approach of Apple, which has relied on China for nearly all of its production needs for decades.

For Vietnam, Apple's turnaround is a boon. The number of Apple suppliers with factories in the country has grown to at least 22 from 14 in 2018, according to Nikkei Asia's analysis of Apple's latest list of available suppliers and interviews with sources. Many other major electronics makers, including Google, Dell and Amazon, have also set up production bases in Vietnam to diversify outside of China, Nikkei Asia previously reported.

Electronics makers are trying to balance tensions between Washington and Beijing, Eddie Han, a senior analyst at Isaiah Research, told Nikkei Asia.

“Geographically, we found that major international electronics brands such as Apple and Samsung are trying to reduce their reliance on producing products within China. But on the other hand, these international companies have adopted more Chinese suppliers, such as Apple and BYD. These are moves to balance geopolitical influences."

"China's role as the world's factory has been challenged since the trade war, which really makes Vietnam, which is close to China, an ideal destination for many electronics manufacturers as the country gradually develops its supply chain ecosystem," said Eddie Han.