Tech giants bring production to Vietnam to avoid COVID-19 implications

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Two global leading technology firms, Google and Microsoft, most recently expressed hopes of launching devices Made-in-Vietnam within this year.

Google is planning to manufacture its low-cost smartphone Pixel 4A after April 2020 in the northern part of Vietnam. Moreover, its next generation of flagship named Pixel 5 will be produced in Southeast Asia in the second half of this year.

Meanwhile, Microsoft forecast that its latest models of Surface laptops and desktop computers will be manufactured in the same area from the second quarter of this year. Nikkei quoted a Microsoft supply chain executive as saying, “The volume in Vietnam would be small at the beginning, but the output will pick up and this is the direction that Microsoft wants.”

According to Nikkei Asian Review, most of their products are based in China. The COVID-19 crisis has highlighted the inherent vulnerability of concentrating production too heavily in a single place. Concerns are even more serious than during the US-China trade war.

“The unexpected blow from the coronavirus will push electronic builders to further seek production capacity outside their most cost-effective production base of China,” said the executive from Microsoft. “No one could ignore risks after this. It’s more than just cost, it’s about the continuity of supply chain management.”

The companies have kept the plan of moving out of China even after Washington and Beijing inked the first phase trade deal in January. “The coronavirus outbreak just reinforced their determination,” Nikkei quoted its own source.

In a comparison with other well-known brands like Apple, HP, and Dell, technology firms focused on the internet such as Google and Microsoft could be more flexible in leaving China – the largest global electronics manufacturing centre. Accordingly, Apple, HP, and Dell's business depends too much on extremely labour-intensive hardware production. That is also the reason why they find it harder to persify manufacturing locations.

Nevertheless, electronics suppliers have been struggling to keep manufacturing in China with the ongoing COVID-19 crisis. That means Google and Microsoft’s persification efforts still face challenges because a great load of their components is produced in the nation./.