Companies shifting production away from China are facing major challenges in Vietnam

nanoguy

Posts: 909   +12
Staff member
In brief: For the last few years, several tech companies have been on a quest to reduce their reliance on China to manufacture their products. Suppliers of Apple, Google, Amazon, Dell, and Microsoft, have made some progress in expanding to neighboring Asian countries. Still, new Covid-19 outbreaks and a lack of local engineering talent are slowing down this transition.

In 2019, during the trade war between China and the US, there were numerous reports that tech giants were exploring options to move away from the heat and best protect their financial interests. Their main goal was (and still is) to shift as much of their manufacturing as possible away from China and into countries like India, Vietnam, and Mexico, where labor is less expensive, and the resulting products aren't subject to inflated import taxes.

This line of thinking is also endorsed by manufacturers like Foxconn, which believes China can no longer be "the world's factory." However, the process has been far from a smooth one, with companies like Amazon and Apple quickly running into issues like unfair pay and child labor, on top of a series of political barriers and supply chain bottlenecks that aren't easy to overcome.

Then the pandemic hit, making the perils of the tech industry's heavy reliance on China all the more obvious. More than a year later, new Covid-19 outbreaks are still affecting the ability of tech companies and their key suppliers to shift production to places like Vietnam and India.

According to Nikkei, Apple will now start making AirPods in China instead of Vietnam. At the same time, Google and Amazon will do the same with the mass production of the Pixel 6 smartphone and various smart home devices, despite the higher cost of Chinese labor. Other companies may also follow in their footsteps while they reassess the risks of dealing with strict border controls and local lockdowns, as well as the possibility that some suppliers might use forced labor.

Chief among their concerns is that developing new supply chains and building more production capacity in India and Vietnam requires engineering talent, which is hard to find locally and even harder to bring in due to travel restrictions. As a result, companies can only manufacture the same products they make elsewhere, making these countries less competitive. For instance, Apple has had to postpone plans to move some MacBook and iPad production to Vietnam, which is likely true for any other company planning to make tablets and laptops in the country.

IDC analysts believe officials will eventually ease the restrictions as time goes on, and the process started in 2018 will continue. In the meantime, it looks like China will be able to keep its title as the "world's factory" for some time yet.

Permalink to story.

 

Jroc187

Posts: 61   +41
I don't know, but there IS another way. Stop paying the CEO's & whatnot billions, take a less profit approach, and bring the manufacturing back to the U.S. or other nations shores?
Oh, but the stockholders won't like that will they.
I don't know, but there IS another way. Stop paying the CEO's & whatnot billions, take a less profit approach, and bring the manufacturing back to the U.S. or other nations shores?
Oh, but the stockholders won't like that will they.
Nope, nothing you can do about it, sir. The CEO is given stock and if stock price goes up,he or she gets paid
 

mctommy

Posts: 401   +135
I have family in Vietnam and they have been on lockdown for the last several weeks now. So the picture of those tents are essentially who they bubble their workers and to keep them working.

Some of the production has shifted to Vietnam some years ago already. LG is there, Samsung repairs their phones there, etc...
 

Jroc187

Posts: 61   +41
I have family in Vietnam and they have been on lockdown for the last several weeks now. So the picture of those tents are essentially who they bubble their workers and to keep them working.

Some of the production has shifted to Vietnam some years ago already. LG is there, Samsung repairs their phones there, etc...
And we the American consumer do not care, is what I'm trying to say. I'm sorry that the government over in Vietnam does this **** for their own gain. it sucks! but we won't stop buying the cheapest options because we do not care. time and time again we will do what's best for our pocketbook without thinking about hardship to others, It is a cold world. If you have a smartphone you are part of the problem like the rest of us
 

Watzupken

Posts: 315   +302
I think this is a problem that will never go away when companies are only focused on finding cheap places to manufacture products. In doing so, they put all their eggs in that 1 basket. Diversification seems like an after thought.
 

cliffordcooley

Posts: 12,933   +6,264
All imports should have a 100% tariff. If we can't make the product in country. We should be happy to pay extra in getting it. If companies still refuse to bring manufacturing in country, make the tariff 200%. If companies still refuse to bring manufacturing in country, make the tariff 400%. If companies still refuse to bring manufacturing in country, make the tariff 800%.

People keep talking about the value of the US dollar diminishing. There no wonder when companies keep taking manufacturing to underpaid countries. Someone needs to take a stand and put a stop to it.
 

VitalyT

Posts: 5,837   +5,897
1955 - US goes to war against Vietnam
2020 - US moves manufacturing to Vietnam

Oh the irony and political BS...

Wait for 2040, for a new state in America, called China, or the emergence of UCS - United Chinese States.
 

Austinturner

Posts: 276   +325
All imports should have a 100% tariff. If we can't make the product in country. We should be happy to pay extra in getting it. If companies still refuse to bring manufacturing in country, make the tariff 200%. If companies still refuse to bring manufacturing in country, make the tariff 400%. If companies still refuse to bring manufacturing in country, make the tariff 800%.

People keep talking about the value of the US dollar diminishing. There no wonder when companies keep taking manufacturing to underpaid countries. Someone needs to take a stand and put a stop to it.
Every country in the world would reciprocate and you wouldn’t be able to export anything, hermit economies do not fare well compared to globalised ones. The US can afford a moderate tariff on China but you can’t put it on everyone without tariff retaliation from allies and enemies alike.
 

rmcrys

Posts: 56   +62
I don't know, but there IS another way. Stop paying the CEO's & whatnot billions, take a less profit approach, and bring the manufacturing back to the U.S. or other nations shores?
Oh, but the stockholders won't like that will they.

Most big companies want billions for their stockholders and .EOs (CEOs, etc), then the produce in China / Vietnam and sell in the US, Canada, EU, etc with HUGE profits.

I don't know about other zones, but in Europe / EU most countries have a lot of unemployment (except Germany and a couple of others, due to *still* huge contracts, but it will end soon as also Siemens, BMW, VW are also moving production from Germany to China...) due to closing factories by producing in China/Vietnam/ etc.

Summary:
1) higher unemployment
2) higher taxes and energy costs for the ones that still work (as a part of the people can't pay anything)
3) worldwide shipments from China "to the world" (instead of local production) increases dramatically the pollution
4) Chinese stockholders get so much money (as workers are being underpaid and work as much as 6-7 days a week, sometimes 14-16h/ day) that they buy a lot of companies and real-estate on the EU using local inversion groups (which are then allowed to buy, as in Belgium, Holland,...)
5) already on Chinese hands, they increase dramatically the costs of ownership / rent (more money...)
6) so people in the EU, the same countries that have high unemployment, less local industry, etc pay EVEN MORE to rent an apartment, even more in taxes to pay the unemployment, even more to clean energies (to compensate what China is doing) and so on.

So thank you EU and other countries to increase the employment of your people, increase the rent prices and to increase worldwide pollution, just because 0,0001% want be easily billionaire. Thank you...
 

Irata

Posts: 1,665   +2,796
Government has made manufacturing in the West expensive.
Yup - all those safety and environmental standards, workers‘ rights, Democracy….

It‘s sad but still makes me chuckle when I see ads sponsored by companies that try to pass a fake ‚let‘s make the world better‘ message yet they try gravitate to places with the lowest standards,

It‘s not that making things in the first world is too expensive but it is in the way of insane profits.
 

eforce

Posts: 391   +494
Yup - all those safety and environmental standards, workers‘ rights, Democracy….

It‘s sad but still makes me chuckle when I see ads sponsored by companies that try to pass a fake ‚let‘s make the world better‘ message yet they try gravitate to places with the lowest standards,

It‘s not that making things in the first world is too expensive but it is in the way of insane profits.
To make an iPhone back home cost ~2x
 

Irata

Posts: 1,665   +2,796
To make an iPhone back home cost ~2x
Ah….you probably mean assembly. That‘s just a small part of the total cost which includes parts, packaging, shipping / logistics, marketing, R&D…..all of those costs would not change.

Let‘s do some rough math (mostly estimating) for a $ 1,449 iPhone:
Parts: $500
Other costs (R&D, marketing, shipping): $200
Assembly: $30

That means if the assembly costs are doubled, total cost increases from $730 to $760, I.e. by 4%. Imho, Apple can cover that and still have excellent margins.

Note: I don‘t mind entry level devices being made in low wage countries as that helps keep costs down. Manufacturing represents a much higher part of a $200 device‘s total cost vs a $1,000+ device.
 

Alfatawi Mendel

Posts: 138   +221
There are a lot of people who blame China for their own nations corporations and CEO's moving manufacturing abroad. Maybe time to levy punitive personal taxes on the CEO's of these companies.
 

DCOCA

Posts: 7   +5
Most big companies want billions for their stockholders and .EOs (CEOs, etc), then the produce in China / Vietnam and sell in the US, Canada, EU, etc with HUGE profits.

I don't know about other zones, but in Europe / EU most countries have a lot of unemployment (except Germany and a couple of others, due to *still* huge contracts, but it will end soon as also Siemens, BMW, VW are also moving production from Germany to China...) due to closing factories by producing in China/Vietnam/ etc.

Summary:
1) higher unemployment
2) higher taxes and energy costs for the ones that still work (as a part of the people can't pay anything)
3) worldwide shipments from China "to the world" (instead of local production) increases dramatically the pollution
4) Chinese stockholders get so much money (as workers are being underpaid and work as much as 6-7 days a week, sometimes 14-16h/ day) that they buy a lot of companies and real-estate on the EU using local inversion groups (which are then allowed to buy, as in Belgium, Holland,...)
5) already on Chinese hands, they increase dramatically the costs of ownership / rent (more money...)
6) so people in the EU, the same countries that have high unemployment, less local industry, etc pay EVEN MORE to rent an apartment, even more in taxes to pay the unemployment, even more to clean energies (to compensate what China is doing) and so on.

So thank you EU and other countries to increase the employment of your people, increase the rent prices and to increase worldwide pollution, just because 0,0001% want be easily billionaire. Thank you...


I’m with you 100%, the problem is that we forget that we are the majority, we can create change. But we have become complacent, until we the majority rise against this nothing will change.
 

eforce

Posts: 391   +494
Ah….you probably mean assembly. That‘s just a small part of the total cost which includes parts, packaging, shipping / logistics, marketing, R&D…..all of those costs would not change.

Let‘s do some rough math (mostly estimating) for a $ 1,449 iPhone:
Parts: $500
Other costs (R&D, marketing, shipping): $200
Assembly: $30

That means if the assembly costs are doubled, total cost increases from $730 to $760, I.e. by 4%. Imho, Apple can cover that and still have excellent margins.

Note: I don‘t mind entry level devices being made in low wage countries as that helps keep costs down. Manufacturing represents a much higher part of a $200 device‘s total cost vs a $1,000+ device.

I was referring to the retail price.


The US government can try and force domestic production but it just means US citizens will pay a much higher price, reducing taxes/regulation so industry comes back naturally would be better choice in my opinion.
 

Irata

Posts: 1,665   +2,796
I was referring to the retail price.


The US government can try and force domestic production but it just means US citizens will pay a much higher price, reducing taxes/regulation so industry comes back naturally would be better choice in my opinion.
That's BS. Manufacturing is only a small part of a high end phone's total price, so how would producing a phone affect R&D, the BOM (parts), marketing, etc....

What the article assumes is that all components would be made in the US. That's an extreme exaggeration and plain stupid.

This is completely illogical.
 

eforce

Posts: 391   +494
That's BS. Manufacturing is only a small part of a high end phone's total price, so how would producing a phone affect R&D, the BOM (parts), marketing, etc....

What the article assumes is that all components would be made in the US. That's an extreme exaggeration and plain stupid.

This is completely illogical.
So you don't want it completely made in the US, just assembled?