Following the one-two punch of the trade war and the coronavirus outbreak, Google and Microsoft are now seeking to move their production capacity out of China. CNBC recently reported the two Big Tech firms are working to relocate their supply chains to Vietnam. Similarly, Apple is investigating relocating its component sourcing outside the Sino region.
However, all three corporations have encountered problems establishing new production capacity outside of China.
Google and Microsoft’s Southeast Asian Production Facilities
Last year, America’s largest electronics companies encountered significant problems with their Sino centered supply chains. Though now mostly resolved, the U.S.-China trade war forced new and costly import and export tariffs on device makers. More recently, COVID-19 has caused major production delays and capacity reductions in mainland-located factories.
As a result, Google and Microsoft have accelerated their plans to increase manufacturing capability in Southeast Asia.
Nikkei Asian Review reports Google will begin production of a budget handset rumored to be called the Pixel 4A in Vietnam next month. Moreover, the Silicon Valley giant plans to manufacture its upcoming flagship smartphone there in the second half of the year. The conglomerate also asked one of its partners to update its Thailand-based facilities for the production of its smart home products.
Notably, the search engine company has taken a significant interest in manufacturing hardware in recent years. Currently, the corporation ranks as the world’s second-largest smart speaker producer. Besides, Google saw its global Pixel shipments increase by 50 percent in 2019. To expand its market share, the company is taking steps to make its supply line more stable.
Similarly, Microsoft intends to relocate production of its Surface line of notebooks and desktops to Vietnam. The Redmond, Washington-based corporation wants to start manufacturing PCs in the Southeast Asian nation’s northern region in the second quarter. An unnamed supply chain executive told Nikkei the conglomerate intends to start slow but quickly ramp up its Vietnamese output.
Previously, both conglomerates manufactured most of their hardware in China but thought to shift production during the trade war. However, they encountered difficulties finding material and affordable labor. Nevertheless, the two corporations accelerated their supply chain roadmaps following the onset of the coronavirus.
Apple’s Supply Chain Relocation Plans
In addition, Apple has steps to relocate its supply chain out of China. Last June, The Burn-In reported the iPhone maker asked its suppliers to look into the cost of relocating its production capacity. The corporation sought to find out how much money it would take to move 15 to 30 percent of its component production to Southeast Asia.
Apple made the request after the U.S. government proposed new tariffs that would raise its device prices by 14 percent. In 2019, the conglomerate assembled 90 percent of its products in China.
Last year, Apple and its suppliers looked into India, Indonesia, Malaysia, and Vietnam as possible new production hubs. However, a new report from The Information reveals India proved an unsuitable region for a new supply chain.
Upon investigation, Apple found that no local firms could build its headphones, speakers, or small mechanical parts. Moreover, the corporation found some Indian manufacturers did meet its health, safety, and environmental standards. Also, some of the firm’s suppliers said relocating to the Southeast Asian Republic would be financially impractical.
Consequently, the iPhone maker has expanded its production capacity in Vietnam instead. Currently, the conglomerate sources its Air Pods and OLED displays in the region. That said, Apple made plans to expand its online and physical retail presence in India last month. If that project goes well, the corporation may consider upping its production capacity in the country.
Right now, though, the Cupertino, California-based company makes and assembles most of its products in China.