COVID prevents Apple and Google from migrating out of China

COVID prevents Apple and Google from migrating out of China

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, meanwhile, will start mass-producing its latest AirPods earphones in China instead of in Vietnam as previously planned, two people familiar with the situation said. The company still hopes to move around 20% of new AirPods production to Vietnam later, they said.

Recent COVID-19 breakouts are jeopardising Apple, Google, Amazon, and their key suppliers’ plans to transfer production from China to Vietnam as governments tighten border controls to combat emerging strains of the virus. According to four sources familiar with the situation, Google’s next Pixel 6 smartphone line will be manufactured in China, despite the company’s earlier plans to shift production to northern Vietnam.

AirPods — both entry-level and high-end models — were among the earliest products that Apple began making in significant amounts in Vietnam, having moved production there around two years ago during the height of U.S.-China trade tensions. Apple’s plan to bring some MacBook and iPad production to Vietnam has also been put on hold due to a lack of engineering resources, an incomplete notebook computer supply chain and the dynamic COVID situation, one of the people said.

Production of smart doorbells, security cameras and smart speakers for Amazon, which recently moved to Vietnam, has also faced delays since May as assembly lines in the northern part of the country coped with a surge in local cases and tougher COVID prevention measures, two people with direct knowledge of the matter said.

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.

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.” Sending workers to Vietnam has also become more difficult since a wave of infections intensified in May, according to sources.

Multiple supply chain managers told Nikkei Asia that it has been harder for their Chinese staff to apply for business trips to Vietnam, with “more documents and queries” needed in China since earlier this year. Many of the suppliers say they have tried dispatching engineers of other nationalities, though they still face stricter entry requirements on both sides. “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.

Annabelle Hsu, an analyst with research company IDC, told Nikkei Asia that any setback for Vietnam, which has already emerged as a key alternative manufacturing location to China, is likely to be temporary. “We noticed there are some impacts on production lines and a slowdown in shifting of production capacity due to COVID-19 resurgence and government measures. However, we don’t think the Vietnamese government will adopt such strict measures for very long, otherwise it will affect its own economy and its rising manufacturing prowess,” Hsu said. China still boasts the biggest and most sophisticated electronics supply chain in the world, and the Chinese government will do all it can to prevent a large number of manufacturing jobs from leaving the country, Hsu added. “It’s a long-term tug-of-war between China and non-China production, and at the end of the day the pace of the production shift will depend on the geopolitical pressure from the bigger economies such as the U.S. or India to accelerate it.”

The News Highlights

  • COVID prevents Apple and Google from migrating out of China
  • Check the latest update on Security news
  • .

Disclaimer: If you need to edit or update this news from compsmag then kindly contact us Learn more

For Latest News Follow us on Google News


Latest Headlines
  • Show all
  • Trending News
  • Popular By week
Gone, morning toss-TGIF?
Gone, morning toss-TGIF?
One underlying reason for the pain there, as well as across risk assets, comes back to worries about high inflation and rising interest rates and whether ...
US economic outlook weakens, inflation likely to persist
Russian inflation rises to 17.83% in April, highest since early 2002
Inflation in Russia has accelerated sharply after Russia began what it calls “a special military operation” in Ukraine on Feb. 24. Consumer inflation in ...
US economic outlook weakens, inflation likely to persist
Wants “several months” of inflation falling to call the peak
“Risks to inflation remain strongly on the upside, especially in the midst of the continuing war in Ukraine and the potential that the zero-COVID policy in ...
Musk suspends $44 billion Twitter acquisition due to a fake account
Musk suspends $44 billion Twitter acquisition due to a fake account
“Twitter deals temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users,” Musk told his ...
As Musk suspends the takeover, U.S. stock futures rise and Twitter falls
As Musk suspends the takeover, U.S. stock futures rise and Twitter falls
Fed Chair Jerome Powell repeated on Thursday his expectation that the central bank will raise interest rates by half a percentage point at each of its next ...
Zipaworld Innovation aims to raise $0.5M on a valuation of $14M
Zipaworld Innovation aims to raise $0.5M on a valuation of $14M
Besides, the funds will be utilised to bolster the infrastructure; workforce expansion; global market penetration and elaboration of international network, ...
To minimize government spending, UK Prime Minister Boris Johnson is focusing on public service
To minimize government spending, UK Prime Minister Boris Johnson is focusing on public service
The Institute for Government, a think tank, estimated the savings to the public finances could be around 3.6 billion pounds ($4.38 billion) a year. In the ...
GLOBAL MARKETS-Asian stocks trim weekly losses as dollar remains near 20-year highs
GLOBAL MARKETS-Asian stocks trim weekly losses as dollar remains near 20-year highs
Australian shares gained 1.93%, while Japan’s Nikkei stock index jumped 2.64%. In China, the blue-chip CSI300 index was up 0.61% and Hong Kong’s Hang Seng ...
The US Senate confirmed Powell for a second term as Fed chairman despite rising inflation
The US Senate confirmed Powell for a second term as Fed chairman despite rising inflation
The US Senate confirmed Jerome Powell as chairman of the Federal Reserve on Thursday, reaffirming his status as the country’s central banker for another ...
Zydus seeks new drug for uncontrolled 'bad' cholesterol
Zydus seeks new drug for uncontrolled ‘bad’ cholesterol
Often referred to as bad cholesterol since it gets deposited in the walls of the blood vessels, LDL-c increases the chances of health problems such as heart ...
Show next
We will be happy to hear your thoughts

Leave a reply

Compsmag - Latest News In Tech and Business
Logo