In the coming weeks, Apple and Google will unveil their latest generation of smartphones, trying to distinguish their new devices from their predecessors. But one of the most significant changes is one that consumers will hardly notice. made in china.
A small portion of Apple’s latest iPhones will be manufactured in India, while some production of Google’s latest Pixel phones will take place in Vietnam, said people familiar with their plans.
The shift is a response to geopolitical tensions and growing concerns over supply chain disruptions caused by the pandemic that has engulfed China in recent years. China has long been the factory of the world for high-tech electronics, unrivaled in its ability to attract highly skilled workers and its production capacity to meet the demands of the next hot devices.
But US companies see more risks there. That view was shaped by retaliatory tariffs during the Trump-era trade war and reinforced by China’s armed attack after House Speaker Nancy Pelosi’s visit to Taiwan last month. They are concerned that putting much of their supply chain in China will escalate the conflict with the United States over Taiwan.
China is still by far the most dominant consumer electronics manufacturer. But it’s not just smartphone production that’s moving abroad. Apple produces his iPads in northern Vietnam. Microsoft shipped the Xbox game console from Ho Chi Minh City this year. Amazon manufactures Fire TV devices in Chennai, India. A few years ago, all these products were made in China.
On Wednesday, China said factory activity contracted for the second month in a row in August, according to a closely monitored survey of purchasing managers.
“China’s manufacturing empire is in shambles,” said Lior Susan, founder of Eclipse Venture Capital, which invests in hardware and manufacturing startups. “More and more capital is pulling manufacturing out of China and trying to find alternatives.”
“Everyone is thinking about moving even if they haven’t made the move yet,” said Anna-Katrina Shedletsky, founder of Instrumental, a Bay Area company that remotely monitors assembly lines for electronics companies. I’m here.
When the first outbreak of Covid-19 shut down factories in China in early 2020, the closures disrupted the sales plans of many companies, including Apple, which failed to make iPhones, causing a quarterly had to cut its sales forecast.
The company’s operations team has begun looking at alternative manufacturing locations for future shutdowns in China, three former employees said on condition of anonymity because they are not permitted to discuss their work at the company. said.
Vietnam, where Apple plans to produce AirPods in 2020, has been the subject of much debate, according to one of the people involved. Since then, Apple has started producing watches in the country and moved some iPad manufacturing there. In Apple’s latest list of top 200 suppliers, 20 use factories in Vietnam. By comparison, 155 companies operate factories in China.
Apple will assemble and package a small portion of this year’s iPhone 14, the company’s flagship device, for the first time in India. Although most of the first and most significant production of its devices has taken place in China, Apple has since moved some of its overall iPhone production to India. .
Even if Apple went ahead with its plans, the company was careful not to antagonize China’s ruling Communist Party, as most of its products are still made in China. Japan’s Nihon Keizai Shimbun reported that China conducted military exercises around Taiwan during Pelosi’s visit, prompting Apple to tell its Taiwanese suppliers to use “Chinese Taipei” or “Taiwan, China” for parts destined for China. urged to label
Apple, Microsoft and Amazon declined to comment.
So far, Vietnam has benefited most from China’s vigilance.
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Foxconn, Apple’s largest contract manufacturer, recently signed a $300 million deal to expand a new factory that will create 30,000 jobs in northern Vietnam, according to state media. The latest spending was on top of $1.5 billion the Vietnamese government said Foxconn had already invested in the country.
In the provinces of Bac Giang and Bac Ninh in northeastern Vietnam, Foxconn and other contract manufacturers set up large factories in scenic countryside that was once paddy fields and farmlands, surrounded by temples, banyan trees and ponds. is operating. Workers from all over the country now come to these facilities in search of work.
A sign outside Foxconn’s factory in Bac Ninh advertised that the company was “urgently” seeking to hire 5,000 workers, with an entry-level position offering about $300 a month.Foxconn is offering new jobs on its assembly line in southeastern China’s Shenzhen for a monthly salary of 4,500 yuan, or less than half of about $650.
The wage gap highlights another reason companies are looking for new manufacturing options. Over the past decade, a Chinese manufacturing worker’s annual income has tripled to more than $9,300, according to the Bureau of Statistics.
Foxconn declined to comment for this article.
Tariffs have also pushed up manufacturing costs in China. In 2019, President Donald J. Trump imposed his 15% tariff on tech products such as his smart speakers, smartwatches and wireless his headphones.
As the tariff war rages on, Google looks to alternatives to China. This year, Google plans to move manufacturing from his Foxconn facility in southern China to Vietnam, where it will begin assembling his latest model, the Pixel 7, according to two people familiar with the plan.
The company expects Vietnam to provide half of the high-end pixel phones next year, according to people familiar with the matter.
But Google’s plans for mobile phones next year show how difficult it will be for companies to fully migrate out of China. Google says he’s considering a foldable phone for 2023, but to make such a device would have to use newer screens and hinge technology and move production closer to major Chinese suppliers. There will be, said these people.
Google declined to comment.
For over 20 years, the technology industry has established a wide range of suppliers that manufacture the cords, buttons and machinery essential to assembling smartphones and computers. A centralized supplier reduces shipping costs and makes it easier to repair defective parts.
“We still have a long way to go to diversify the entire supply chain outside of China,” said Mehdi Hosseini, a financial analyst at Susquehanna International Group who specializes in technology supply chains.
Proximity is therefore key when it comes to alternatives to China. According to Cushman & Wakefield, interest from Foxconn and others has seen industrial property prices in Vietnam rise by nearly a third since 2019, to $105 per square meter (about $9.75 per square foot), while warehouses are on the rise. Cost increased by 20%. A global commercial real estate company.
Five years ago, Trang Bui, Cushman’s general manager for Vietnam, showed his customers an industrial site once a month. Now, every day she goes to see factory real estate with clients from the US, Taiwan, South Korea, Japan, Europe and China.
“When you come to Vietnam, all you see is energy,” Bui said. “For outsiders who have never visited the country, it may come as a bit of a shock.”
Vo Q Bao Wen contributed to the report.