Apple’s Production Strategy in Vietnam

In recent years, Apple’s production strategy in Vietnam has significantly evolved as the company extends its manufacturing operations beyond China. This transition has been driven by several factors, including U.S.-China trade tensions, the need to mitigate supply chain risks, and the opportunity to leverage Vietnam’s growing manufacturing capabilities.

This shift is part of a broader trend among North American companies. A survey by the Boston Consulting Group revealed that over 90 percent of North American businesses have altered their production or supply base in the past five years, with many more planning similar changes in the next five years. Between 2018 and 2022, U.S. imports from China decreased by 10 percent, while imports from Mexico, India, and ASEAN countries, especially Vietnam, saw significant increases.

Vietnam’s strategic role in Apple’s supply chain

Apple has significantly expanded its operations in Vietnam, adding eight new partners and bringing the total number of vendors in the country to 35, as of 2024. This expansion makes Vietnam Apple’s leading supplier hub in Southeast Asia and its fourth-largest globally, trailing behind China (158), Taiwan (49), and Japan (44).

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Over the past eight years, Apple has notably increased its supplier base in Vietnam, partnering with major technology companies and contact manufacturers, such as Foxconn, Luxshare, Samsung, Intel, and LG. Vietnam now hosts substantial manufacturing facilities that assemble various Apple products, including AirPods, iPads, and Apple Watches. Analysts forecast that by 2025, Vietnam will be responsible for producing 20 percent of all iPads and Apple Watches, 5 percent of MacBooks, and 65 percent of AirPods. This growth highlights Vietnam’s increasing importance in Apple’s manufacturing strategy.

Additionally, on April 15, 2024, Apple CEO Tim Cook met with Prime Minister Pham Minh Chinh on his two-day visit to Vietnam. Their discussions focused on enhancing collaboration and fostering high-quality investments. Cook committed to increasing spending on Vietnam-based suppliers and supporting innovation projects.

Apple’s presence in Vietnam has created approximately 200,000 jobs through its supply chain and the iOS app industry. Since 2019, the U.S. tech giant has invested VND 400 trillion (around US$15.8 billion) in the country via local supply chain partners. This substantial investment underscores Apple’s confidence in Vietnam’s capabilities and its crucial role in the company’s global supply chain.

Source: Apple’s supplier list for 2023

The supplier data shows that the majority of factories doing business with Apple are located in northern Vietnam.

Choosing Vietnam and focus on ESG goals

Vietnam’s robust economic growth and its diversified manufacturing base underscore its resilience and flexibility. The country is strategically poised to enhance its attractiveness as a preferred manufacturing destination for Apple and other multinational technology firms.

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Forward-looking strategies by Vietnam’s policymakers have also paid off, including policies to advance workforce skills, upgrading connectivity infrastructure, and cultivating an appealing investment climate. These efforts align with broader goals of fostering technological progress, driving innovation, and solidifying Vietnam’s status as a global leader in value added manufacturing. Vietnam’s political stability, advantageous trade policies, and proximity to China underline its appeal as a manufacturing hub.

Expanding their Vietnam operations not only helps Apple secure its supply chain but also aligns with broader industry trends toward geographic diversification and risk management.

Further, Apple is also increasingly emphasizing sustainability in its production strategies. In Vietnam, efforts include ensuring suppliers adhere to environmental standards and promoting energy-efficient manufacturing practices. This strategic shift carries wide-ranging implications, profoundly influencing Vietnam’s economic development and positioning it prominently in the realm of technology manufacturing.

READ: ESG Strategy a Key Focus Area for Foreign Businesses in Vietnam

Export growth

Vietnam, along with China and India, is a key destination for Apple’s device assembly for the global market. The increasing shipment volumes, which surpass those of competitors like India, demonstrate this trend.

This increase in iPhone shipments confirms Vietnam’s status as a major component in Apple’s worldwide supply chain. Notably, Vietnam is one of the largest suppliers of Apple iPhones, indicating a significant shift in the global electronics manufacturing landscape.

Besides catering to domestic demand, the majority of Vietnam’s iPhone exports are headed to Singapore and the Philippines. These countries have emerged as key markets for Vietnamese-manufactured iPhones, reflecting the region’s growing customer base and technological penetration.

Investments and outlook

Apple has invested nearly VND 400 trillion (US$15.84 billion) since 2019 across its supply chains in Vietnam. During the same period, the company has significantly boosted its annual expenditure in the country.

Moreover, last year, Foxconn, Apple’s primary iPhone supplier, initiated a significant expansion in Vietnam, committing US$300 million to enhance production facilities. As of now, its factory in Vietnam covers an extensive 111-acre site (Saigon-Bac Giang Industrial Park Corp).

Apple’s scaled-up financial involvement in Vietnam is anticipated to further develop the country’s technological infrastructure and stimulate job creation throughout its supply chain. Additionally, this move solidifies Vietnam’s role as a critical partner in Apple’s strategy to meet global demand for its products and mitigate risks associated with the complexities of global supply chains.

Conclusion

Vietnam is poised to play an increasingly important role in Apple’s global operations. Continued focus on infrastructure development, workforce training, and regulatory compliance will be critical to sustaining this growth trajectory. Moreover, Vietnam’s emergence as one of the largest exporters of Apple iPhones highlights its increasing integration into the global electronics supply chain. As these trends continue to evolve, Vietnam’s role in shaping the future of technology manufacturing remains promising.

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