Engineering & Construction
In Effort to Abide by China Plus One Strategy, Tech Companies Have Their Sights on Vietnam for Manufacturing
Tech manufacturers are shifting complex production beyond China to capitalize on lower costs and supply chain resilience across Southeast Asia
Key takeaways
Tech manufacturers are shifting complex production beyond China to capitalize on lower costs and supply chain resilience across Southeast Asia
Several tech companies are applying strategic moves to diversify its manufacturing operations from China to other countries, like Vietnam. This signifies a broader shift in the tech industry's global supply chain. While Vietnam has traditionally been considered a hub for low-tech electronic manufacturing, it's quickly becoming an option for more sophisticated production needs. This pivot is attracting tech giants like Apple attracted to lower costs and Vietnam's other economic advantages.
China Plus One isn't about substituting China. It's also about supplementing it.
But the story is far from a clean break. China's robust infrastructure and skilled workforce mean that China Plus One isn't about substituting China. It's also about supplementing it. As countries and companies navigate this new terrain, there are several challenges that must be tackled. Overall, even with Apple's strategy of geographically diversifying its supply chain is welcomed, a full-on migration away from China is not exactly feasible given the manufacturing ecosystem
Hamid Noori, provides invaluable insights into this fascinating development. He serves as the Executive Director of the Lazaridis Executive Master's in Technology Management Program at Wilfrid Laurier University. With an extensive background in technology management and international business, Noori's knowledge shines a light on the future directions of the technology manufacturing landscape, and how Apple is one of the tech companies leading this charge.
Noori's Thoughts on Manufacturing Vietnam
Apple's Shift to Vietnam for Manufacturing
"Apple is slowly shifting its device assembly processes to factories in Vietnam to minimize its reliance on China. And then, of course, it has started to do the iPad production, to move the iPad production to Vietnam from China and start manufacturing watches and MacBooks."
Apple is slowly shifting its device assembly processes to factories in Vietnam to minimize its reliance on China.
— Hamid Noori, Executive Director of the Lazaridis Executive Master's in Technology Management Program at Wilfrid Laurier University
JPMorgan's Forecast on Apple's Manufacturing
"JPMorgan forecasts that the percentage of Apple products made in China will drop from 95 percent to 75 percent by 2025."
Why Vietnam is Favorable for Manufacturing
"Now, the reason that Vietnam is becoming one of the favorable target for these manufacturing companies, giant manufacturing companies such as Apple, is because of the, of course, low labor costs. And then the free zone economies that they are promoting quite extensively."
Apple Encouraging Contract Manufacturers to Move
"And not only Apple is moving, you know, strategically moving to Vietnam, its contract manufacturers also are encouraged and in some cases perhaps asked for to move to Vietnam. Pegatron, LuxShare, Wistron, these are expanding their production facilities in Vietnam as Apple is moving out of China."
The Continued Role of China in Supply Chain
"But, you know, one thing that I have to be careful here, and that is when we are talking about moving out of China, to me, it is almost impossible to assume that these big companies are going to forget about China. China still has a very, very strong supply chain system, a very knowledgeable workforce."
Challenges in Moving Operations to Other Countries
"There are challenges moving operations to other countries. Not only it's exclusive to China plus one, but any time that any country, any company wants to move to its operations from one country to another country, there are a number of challenges that must be met. For example, labor skills and availability, understanding of custom processes and government regulations, warehouses, space and services, freight capacity, supply of inbound materials, transit times and so on and so forth."
Hamid Noori serves as the Executive Director of the Lazaridis Executive Master's in Technology Management Program at Wilfrid Laurier University. With an extensive background in technology management and international business, Noori's knowledge shines a light on the future directions of the technology manufacturing landscape, and how Apple is one of the tech companies leading this charge.
About the author
Hamid Noori completed his doctoral studies at Ivey Business School, Western University in Canada. He has shared his knowledge as a visiting scholar at various esteemed institutions, including the Haas School of Business at UC-Berkeley, Xian Jiaotong University in China, USC’s Marshall School of Business, and several others. In 2001, he was the recipient of the Award for Innovative Excellence in Teaching, Learning & Technology, and his case study, Danier Leather Inc., was honored with the International Case Competition Award. Mr. Noori is credited as an author or co-author of three books, one conference proceedings, numerous monographs, over 100 research papers, and three commercial software packages. His noteworthy achievements include being one of the earliest recipients of the University Research Professor Award, the highest academic recognition at Laurier. Mr. Noori has also taken on significant roles, including the funding director for the doctoral program and a research center in management of technology. He has guided and mentored numerous PhD and master's students in the realm of operations and technology management.
