Major Apple suppliers are shifting manufacturing capacity outside of China, with Vietnam and India being their top destinations, as firms struggle with supply disruptions and geopolitical tensions.
China-based GoerTek, which makes Apple’s AirPods, is investing $280 million in a new manufacturing plant in Vietnam while also considering other destinations like India. Since January, the company has been receiving many questions from clients as to “when can you move out,” GoerTek deputy chairman Kazuyoshi Yoshinaga said in an interview with Bloomberg.
China’s strict COVID regulations that disrupted production, as well as Beijing’s simmering geopolitical tensions with the United States, are said to be some of the factors driving the exit of various firms from the country.
“We get requests from our clients almost every month. ‘Do you have any plans to expand to India?’” Yoshinaga said. “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.”
Overall, the flow of manufacturing indicates that activity is moving out from China, he said. “I don’t think it’s going to return. It’s one-way.”
This month, Taiwan-based Foxconn Technology Group, Apple’s biggest contractor, announced that it had bought a new site in Vietnam as the firm pushes ahead with shifting production out of the mainland.
A lease for 45 acres worth $62.5 million has been signed by Foxconn with Saigon-Bac Giang Industrial Park Corp., according to South China Morning Post. In August, Foxconn signed a $300 million deal with a developer in Vietnam to establish a factory in Bac Giang, where it already manufactures AirPods and iPads.
Last year, Foxconn’s iPhone plant in the Chinese city of Zhengzhou was affected by violent protests as well as employee exodus amid stringent COVID-19 control policies imposed by Beijing. The plant is the largest iPhone manufacturing facility in the world.
In a recent earnings call, Apple CEO Tim Cook cited disruptions at the Zhengzhou plant while reporting a decline in revenue during fourth quarter 2022.
In December, Foxconn announced a $500 million investment in its subsidiary in India. The company reportedly intends to boost its workforce count at its iPhone manufacturing plant in India by four times.
It isn’t just Apple suppliers that are moving out of China. In October 2022, for example, carmaker Stellantis announced that its joint venture in China was filing for bankruptcy. CEO Carlos Tavares had noted that political interference by the Chinese regime in the country’s business sector was rising.
Kyocera, one of the largest chip component manufacturers in the world, has begun shifting production from China to other nations. The company is building its first factory in Japan in almost two decades.
In a Jan. 23rd commentary at The Epoch Times, Dr. Zhang Tianliang, a professor at Fei Tian College, pointed to China’s population crisis as one of the factors why China will lose its status as “the world’s factory.”
Data from China’s National Bureau of Statistics show that the country’s population fell by 850,000 people in 2022. The last annual decline happened in 1961, during the Great Famine. But unlike those times, the current population decline is “irreversible,” Tianliang wrote.
“China’s population will continue to decline. China was able to attract manufacturing in the first place because of low labor costs. But the scarcity of human resources means that labor costs have become more expensive.”
China has faced an unprecedented loss of lives during the COVID-19 epidemic, and with a lowering birth rate across the nation, many sectors including manufacturing will face an insurmountable obstacle in coming times.
In addition to India and Vietnam, countries such as Mexico and Turkey are expected to benefit from the United States and the European Union pushing to diversify supply chains, Michael Zezas, head of U.S. public policy research and municipal strategy at Morgan Stanley Research, said in a post on July 24, 2022.
Governments and corporations are expected to invest “substantially in on-shoring, near-shoring, and friend-shoring for value chains,” he said.