19.08.2021, 09:43

COVID Slows Apple and Google Production Shift to Vietnam

Covid-19 resurgence has delayed the shift of Apple, Google and Amazon manufacturing from China to Vietnam due to tightened border control and mobility restrictions

The Apple Inc. logo is seen hanging at the entrance to the Apple store on 5th Avenue in Manhattan, New York, U.S., October 16, 2019. Photo: Reuters.

Google's upcoming Pixel 6 smartphone range will be made in China even though the company had planned to move production of the handsets to northern Vietnam early last year, four people familiar with the matter told Nikkei.

Like the Pixel 5 range last year, the new phones will be assembled in the city of Shenzhen due to limited engineering resources in Vietnam and intermittent travel restrictions, the people said.

Apple will start producing its latest AirPods earphones in China instead of Vietnam as previously planned, two more experts told the news outlet.

The company plans to move around 20 percent of new AirPod production to Vietnam later, it was added.

According to Yahoo Finance, AirPods were among the first products that Apple began making in significant amounts in Vietnam after moving production there about two years ago during the peak of U.S.-China trade tensions.

The Tim Cook-led company's plan to bring some MacBook and iPad production to Vietnam has also been put on hold.

Production of smart doorbells, security cameras and smart speakers for Amazon in northern Vietnam has also faced delays since May, two people with direct knowledge of the matter told Nikkei.

Thanks to its young labor force and proximity to China, Vietnam was well placed to attract tech manufacturers when Washington began imposing punitive tariffs on Chinese-made goods in 2018. Suppliers of Apple, Google, Amazon, Microsoft and Dell have set up or expanded factories in the country over the past few years.

Photo: Wall Street Journal

Building a new regional supply chain, however, also requires experienced engineers and training for local workers. Both China and Vietnam have adopted stricter border control measures this year, which has slowed the production shift between the two countries, a supply chain executive serving Apple and Google told Nikkei Asia.

The executive said it is especially challenging to conduct so-called new product introductions -- in which companies and suppliers work together to develop and produce a completely new product -- in Vietnam due to the lack of engineers.

"[Vietnam's] engineering workforce is still far from adequate," the person said. "With all the travel restrictions, it's only feasible to make products in Vietnam that are already in mass production elsewhere, rather than starting production of upcoming products from scratch in the country."

China's National Immigration Administration earlier this month confirmed it had tightened border controls and slowed the issuance of new passports and travel documents to contain outbreaks of the delta variant.

"The administration has strictly reviewed all of our citizens' passports and travel document applications to stop the pandemic from spreading through cross-border movements," a public question-and-answer document published by the administration on Aug. 4 said. "The administration will continue to adopt the strict policies going forward to restrict unnecessary cross-border travel."

In recent years, major tech giants have been shifting or making plans to move production from China to Vietnam to diversify their supply chains.

However, the recent outbreaks of Covid-19 this year in both the northern and southern region have put on hold these transitions, as reported by VNE.

"The border control has been tightened in the past few months. We could not easily dispatch our Chinese engineers to support our production projects for Amazon in northern Vietnam, so the company has been bringing in fully vaccinated Taiwanese engineers from China," said a senior manager of an Amazon supplier.

To combat the recent surge in infections, key Vietnamese provinces also ordered factories to halt production unless they could provide sleeping or travel arrangements for workers. Samsung Electronics temporarily halted production in Ho Chi Minh City and scaled back its workforce because of the intensified COVID situation. Key Apple suppliers Foxconn, Luxshare and Goertek in May also briefly suspended production in northern Vietnam to comply with stricter COVID control measures.

Vietnam has recorded over 289,200 Covid-19 cases since the end of April.

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Jasmine Le

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