Nikkei: Apple ramps up AirPods production in Vietnam amid COVID-19

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Apple is mass producing AirPods in Vietnam for the frist time. (Nikkei Montage/AP/Reuters)

Sources familiar with the matter told Nikkei Asian Review, some 3 million to 4 million units, or around 30% of total classic AirPods production this quarter, will be "made in Vietnam”. The production relocation does not yet include AirPods Pro, a high-end version with noise-cancellation features that Apple introduced last October.

Nikkei said this is a sign the US tech giant is accelerating its diversification of production out of China amid the coronavirus pandemic.

"The mass production of AirPods in Vietnam started as early as in March," the source said.

In mid-January, when the U.S. and China inked the first phase of a deal to ease a yearlong trade conflict, Apple slowed efforts to shift production out of China, its biggest production base. But the global pandemic has served as an additional reminder for tech companies of the importance of diversification and manufacturing sustainability -- not just low costs.

"It's still an irreversible trend that big U.S. tech companies will need to gradually seek production bases outside China," another supply chain executive told Nikkei.

According to this boss, most of the U.S companies including Apple are looking for non-China production.

“Some prefer Vietnam and some like Thailand, some in India, and some in the Americas, and others Southeast Asian nations."

Earlier, Apple had asked suppliers to evaluate plans to move around 15% to 30% of its hardware production out of China at the height of Washington-Beijing tensions last year. China-based GoerTek, a main AirPods assembler, began preparing to shift production to Vietnam as early as October 2018 and began some test production last summer, as Nikkei first reported.

Luxshare Precision Industry, also known as Luxshare-ICT, had initiated new investment last year in the Southeast Asian country and also passed Apple's qualification to mass produce the wireless headphone there, two people said. Inventec, another AirPods assembler, is currently building a plant in Vietnam, at Apple's requests, a person with knowledge of the matter told Nikkei.

Apple has gradually formed a more complete acoustics supply chain in north Vietnam, where the Cupertino, Calif., tech giant has long sourced its traditional EarPods -- the wired headphones that come with iPhones -- from multiple suppliers' factories there.

Meanwhile, its acoustic component supplier, Merry Electronics, is collaborating with Luxshare to prepare a facility in Vietnam slated to begin operations as early as this summer, according to the company. Many Apple suppliers, such as the two major iPhone builders Foxconn and Pegatron, and iPad maker Compal Electronics, are all expanding production in north Vietnam even though they are not necessarily helping make Apple products there at the moment. Many are currently helping other tech companies, such as Google and Amazon diversify production.

Willy Shih, professor of management practice at the Harvard Business School, told Nikkei that the global pandemic will force a lot of tech companies to take another look at supply chain continuity issues.

"So far, in terms of the tech supply chain, China really has the best infrastructure, transportation, skilled workers and logistics. But we will see more diversification in the coming years, certainly for the electronics industry, as now they realize they can't put all the eggs in one basket."

"I would say the more likely scenario is these big companies will look for China plus one, China plus two other countries, or even China plus three other countries in the longer term," Shih said.

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