Apple's Approach To Production In Vietnam

In recent times, Apple has significantly changed its production approach in Vietnam, expanding its manufacturing operations beyond China. This transformation has been influenced by various factors such as trade tensions between the U.S. and China, the need to reduce supply chain risks, and the opportunity to take advantage of Vietnam's growing manufacturing capabilities.

This shift reflects a larger trend among companies in North America. According to a survey by the Boston Consulting Group, more than 90 percent of North American businesses have made adjustments to their production or supply base in the last five years, with many planning similar changes in the next five years. From 2018 to 2022, U.S. imports from China decreased by 10 percent, while imports from Mexico, India, and ASEAN countries, particularly Vietnam, experienced significant growth.

The strategic importance of Vietnam in Apple's supply chain

Apple has significantly expanded its operations in Vietnam, adding eight new partners and bringing the total number of vendors 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).

Over the past eight years, Apple has notably increased its supplier base in Vietnam, partnering with major technology companies and contract 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. ince 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.

Selecting Vietnam as the target and emphasizing ESG objectives

Vietnam's strong economic growth and diverse manufacturing sector demonstrate its resilience and adaptability. The country is strategically positioned to increase its appeal as a top choice for manufacturing for Apple and other global technology companies.

Vietnam's forward-thinking policies, such as improving workforce skills, upgrading infrastructure, and creating an attractive investment environment, have been successful. These efforts align with broader goals of promoting technological advancement, fostering innovation, and solidifying Vietnam's position as a global leader in high-value manufacturing. The country's political stability, favorable trade policies, and proximity to China further enhance its attractiveness as a manufacturing center.

Expanding its operations in Vietnam not only helps Apple secure its supply chain but also aligns with the industry trend towards geographic diversification and risk management.

Additionally, Apple is placing increasing emphasis on sustainability in its production methods. In Vietnam, this includes ensuring suppliers meet environmental standards and promoting energy-efficient manufacturing practices. This strategic shift has far-reaching implications, significantly impacting Vietnam's economic development and positioning it prominently in the technology manufacturing sector.

Increase in exports

Vietnam, alongside China and India, plays a crucial role in Apple's global device assembly operations. The rising shipment volumes, surpassing those of competitors like India, underscore this trend.

The surge in iPhone shipments solidifies Vietnam's position as a major player in Apple's worldwide supply chain. Notably, Vietnam stands out as one of the leading suppliers of Apple iPhones, signaling a significant shift in the global electronics manufacturing landscape.

In addition to meeting domestic demand, a majority of Vietnam's iPhone exports are directed towards Singapore and the Philippines. These countries have become important markets for Vietnamese-manufactured iPhones, reflecting the region's expanding customer base and technological influence.

Outlook for investments

Apple has put in an investment of nearly VND 400 trillion (US$15.84 billion) since 2019 in its supply chains in Vietnam. During the same timeframe, the company has significantly increased its annual spending in the country. Additionally, last year, Foxconn, Apple's main iPhone supplier, began a substantial expansion in Vietnam by allocating US$300 million to improve production facilities. Currently, its factory in Vietnam spans across a vast 111-acre site (Saigon-Bac Giang Industrial Park Corp).

Apple's expanded financial commitment in Vietnam is expected to contribute to the development of the country's technological infrastructure and drive job creation throughout its supply chain. Furthermore, this move reinforces Vietnam's position as a crucial partner in Apple's efforts to meet global demand for its products and reduce risks associated with the complexities of global supply chains.

Conclusion

Vietnam is positioned to take on a more significant role in Apple’s worldwide operations. Maintaining this growth path will depend on ongoing attention to infrastructure development, workforce training, and adherence to regulations. Additionally, Vietnam's position as a major exporter of Apple iPhones underscores its growing involvement in the global electronics supply chain. As these developments progress, Vietnam's potential to influence the future of technology manufacturing appears promising.