Bottom line: With a plan to double its smartphone shipments from 2018, Google is looking to sell between 8-10 million Pixel units this year. To achieve that, the company is looking to move some manufacturing from China to Vietnam amid higher Chinese labor costs and tariffs resulting from the US-China trade war.
Vietnam seems to be the next country of choice for tech companies looking to diversify their supply chain in the face of US tariffs on Chinese-manufactured products. Like the iPhone, Google is now reportedly looking at Vietnamese factories for the production of its Pixel phones.
A report by Nikkei states that Google started working with a partner this summer to convert an old Nokia factory in Vietnam's northern province of Bac Ninh for manufacturing Pixels. The company will also have an experienced workforce on hand since Samsung also developed its smartphone supply chain in Bac Ninh a decade ago.
Nikkei sources also say that Google intends to eventually move production of most its American-bound hardware outside of China, like its Pixel phones and Google Home smart speaker, in a bid to avoid tariffs resulting from the US-China trade war and higher Chinese labor costs.
Under the current plan, the Pixel 3A, for example, will see some of its production move to Vietnam before the end of this year while some Google smart speakers are likely to be made in Thailand. However, despite these plans, Google is still heavily reliant on Chinese production for the most part where it tends to keep its new product development and initial manufacturing.
"The U.S. company knows that if it is going to be serious about making hardware, it could never give up the massive Chinese market," said one of the sources, but the plan to diversify its production comes in the wake of "rising costs and the macro-environment" in China.
Although the Pixel brand doesn't currently have a large footprint in the smartphone industry, the business is growing at a rapid pace with Google eyeing a shipment of 8 to 10 million Pixels for this year. In 2018, the US was the Pixel's biggest market with 70 percent sales, followed by the UK and Japan, according to IDC. By diversifying its supply chain, Google can capitalize on these markets and further bolster its smartphone business.