On Wednesday, Nikki Asian Review reported that Google would relocate the production of its smartphones from China to Vietnam. The Big Tech firm is making the change to lower its production costs and avoid trade war-related tariffs. The corporation intends to begin manufacturing its Pixel 3A in the Southeast Asian nation by the end of this year.
Google’s Smartphone Ambitions
While Google’s Android operating system has powered smartphones for more than a decade, the brand only recently expanded into making its own hardware.
In 2016, the corporation launched its Pixel line of mobile devices. Though manufactured by HTC, Google designed the handsets and released them under their name. While the franchise has not garnered iPhone-level sales, it has attracted a dedicated fan base. Last year, IDC reported the company sold 4.7 million smartphones.
Thanks to strong marketing and hardware upgrades, the firm has already shipped 4.1 million Pixel 3A devices this year. Moreover, the technology company intends to sell between eight and 10 million phones by years end.
By re-centering its supply chain in Southeast Asia, Google is ensuring its future smartphone sales will be more lucrative. According to Nikkei, the firm will be up to manufacture its devices less expensively in Vietnam than in China. Furthermore, the corporation will be able to sell its smartphones without losing revenue to the U.S.-China trade war.
Indeed, with the Trump administration levying a new 10 percent import tax on Chinese made electronics on December 15, Google will have a pricing advantage over competitors like Apple, LG, and Sony in 2020.
Notably, the corporation isn’t just relocating the manufacture of its smartphone’s out of China. In June, Google transferred production of its Nest smart home components to Malaysia and Taiwan. The firm made the move to avoid paying a 25 percent import tax on the devices. The company shifted fabrication of its data center motherboards to Malaysia for the same reason.
Google also plans to begin manufacturing some of its smart speakers in Thailand.
Nikkei also reports Google will still maintain some production facilities in China to take advantage of the local market. By doing so, the firm will avoid paying the retaliatory tariffs Beijing has promised to institute in response to Washington’s future new levies.
As the Sino-American trade war shows no signs of abetting, an increasing number of technology companies have taken steps to move their supply chain out of mainland China. HP and Dell are working to move 30 percent of their laptop manufacturing out of the Sino region. Similarly, GoPro announced it would transfer production of its action cameras to Mexico in February. Microsoft and Amazon are also looking for a new country to source their hardware due to import tax concerns.
Most notably, in June, The Burn-In reported Apple told its manufacturing partners to figure out how much it would cost to relocate 15 to 30 percent of their supply chain out of China. With its hardware sales already flagging, the firm is worried an estimated 14 percent price increase would be devastating to its domestic revenues.
Indeed, while China will remain the electronics industry’s production hub in the near term, the trade war has seemingly forced a paradigm shift.