Apple supplier plans to shift production from China to Vietnam

Apple supplier plans to shift production from China to Vietnam

The shift is aimed to avoid being caught up in the escalating trade tensions between the United States and China.

GoerTek has announced its intention to move production of the wireless earphones from China to Vietnam to avoid being caught up in the escalating trade friction between the United States and China, the Nikkei Asian Review reported.

GoerTek has asked all suppliers involved in AirPods production to confirm by the end of this week whether they can ship all necessary materials and parts directly to Vietnam, the newswire cited a source in the supply chain as saying.

The decision has not yet been finalized as it requires further discussion with Apple, which has been informed of the plans. The Chinese company, based in the eastern city of Weifang, also said it hopes all suppliers maintain original contract prices and deliver to previously agreed schedules.

GoerTek currently has a production facility in northern Vietnam near Hanoi city making wired headsets for iPhones.

China is not only Apple's most important manufacturing base, but the US company also relies on the Chinese market for some 20% of its annual revenue. Any shift by Apple could trigger big consequences.

AirPods, along with the Apple Watch and smart speaker HomePod, were initially included in the US$200 billion worth of Chinese goods that were hit with a 10% tariff starting on September 24. However the products won a last-minute exemption. US President Donald Trump has threatened to impose additional tariffs on the remaining US$267 billion of imports from China in the near future, bringing the total value to US$517 billion, exceeding US$505 billion worth of goods that China shipped to the US last year.

Meanwhile, Cheng Uei, which supplies chargers and connectors for iPhones and Android smartphones, said it is considering bringing some production back to Taiwan and Southeast Asian countries that may include Thailand, Vietnam and the Philippines because of the US-China trade tensions.

“The supply chains there are more developed compared with other emerging markets, while the labor costs are also cheap,” the company’s Chairman T.C. Gou said.

However, Gou said it is not easy to shift away from China, with mature supply chains established there for decades. Local Chinese governments are also offering more tax incentives and friendly investment policies to encourage manufacturers to stay, he said.

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