Doing Business

The Rise of Apple’s Manufacturing in Vietnam

Trường Lăng

November 24, 2023

Doing Business

The Rise of Apple’s Manufacturing in Vietnam

Trường Lăng

November 24, 2023

In recent years, Vietnam has become a significant player in Apple’s manufacturing network, altering the dynamics of the tech giant’s global supply chain. As one of Apple’s primary manufacturing partners, Vietnam’s role has surged in importance. In this article, we will explore the intricacies of Apple’s production in Vietnam and the strategic decisions Apple has undertaken to fortify its position. Furthermore, we’ll delve into the impact of these developments on the local manufacturers and Vietnam’s broader economic landscape.

Apple’s Manufacturing Footprint in Vietnam: Growth and Strategies

Apple’s Shifting Focus to Vietnam

Apple’s supplier landscape witnessed a significant transformation in recent years, with Vietnam emerging as a prominent destination. In 2022, Apple’s global supplier list included a substantial presence in Vietnam, with 25 suppliers having established factories within the country’s borders.

Previously, China had been the dominant location for Apple’s suppliers, accounting for 44% to 47% of their manufacturing operations in the five years leading up to 2019. However, this rate decreased to 41% in 2020 and further to 36% in 2021. In contrast, Vietnam’s share increased, rising from 2.2% to 3.7% during the same period. Apple and its partners are actively working to diversify their investments, with Vietnam positioned as an alternative manufacturing hub.

According to DigiTimes, Vietnam is poised to play a more substantial role in Apple’s global supply chain. As per JPMorgan’s assessment, it is anticipated that the nation will manufacture one-fifth of iPads and Apple Watches, 5% of MacBooks, and an outstanding 65% of AirPods by the year 2025. Vietnam isn’t merely a production hub but is also becoming a thriving consumer market. With the launch of the Apple Store online in Vietnam, Apple is actively engaging with Vietnamese users, enabling them to purchase products with ease and providing customer support through a Vietnamese-speaking team. Additionally, Vietnam is the third Southeast Asian country to offer Apple Pay, further underscoring its significance to the tech giant.

Apple's Manufacturing Footprint in Vietnam
Apple Pay officially launched in Vietnam. Source: Apple

Notable Investments by Apple’s Contractors

In June 2023, Compal Electronics, a significant manufacturing contractor for Apple’s iPad and Apple Watch, took a significant step by leasing land to establish a new factory in Vietnam. The factory, situated in Lien Ha Thai industrial park, is part of a project with a total registered investment capital of USD 260 million. This venture is set to manufacture a wide range of products, including computers, communication equipment, and electronic components, and is expected to generate an estimated revenue of about USD 1.2 billion by 2029 and USD 6.8 billion by 2037.

Notable Investments by Apple's Contractors
Compal Electronics took a significant step by leasing land to establish a new factory in Vietnam. Source: Baodautu.vn

Compal Electronics already operates in Vinh Phuc Province, Vietnam, producing Apple products. This expansion underscores their commitment to enhancing their production capabilities in the country.

Meanwhile, Foxconn, one of Apple’s largest contractors, has been progressively transitioning iPad and MacBook production to Vietnam. With over 60,000 employees in the country, Foxconn is investing heavily in its Vietnam operations. Notably, Foxconn Industrial Internet (FII), a Foxconn subsidiary, is set to supply made-in-Vietnam servers exclusively for Apple, supporting the company’s AI services development.

Impact on Vietnam’s Economic Landscape: Apple’s Manufacturing Effect

Economic Growth and Job Creation

One of the key factors propelling Vietnam’s impressive economic growth is the substantial Foreign Direct Investment (FDI) that supports the manufacturing sector and enhances the complexity of products produced in the country. Harvard University’s research underscores the importance of product complexity in driving a developing nation’s economy. In this context, the strong support from major FDI players, including Apple and its partners, instills confidence that FDI inflows, especially into the hi-tech sector, will continue to be a driving force behind Vietnam’s economic growth. Apple’s decision to commence the production of Apple Watches and MacBooks in Vietnam exemplifies the country’s capacity to handle intricate manufacturing, even for products as complex as Watches.

Apple’s Impact on Vietnam's Economic Landscape
Apple to start making MacBooks in Vietnam by May 2023. Source: GenZ

As highlighted by research from LSE and other prestigious institutions, FDI exerts a profound influence on elevating a nation’s economic status. The immediate impact of newly announced foreign investments leads to the creation of relatively well-paying jobs for the local workforce. Notably, Apple’s decision to relocate production units to Vietnam is poised to fuel a ‘war for talent’ in the country, a testament to the appeal of such investments. Furthermore, hi-tech FDI not only contributes to short-term GDP growth through increased incomes but also enhances Vietnam’s capacity for complex product manufacturing. This dual effect substantially bolsters Vietnam’s economic outlook, with domestic consumption playing a significant role in this economic transformation.

Apple as a Transformational Manufacturing Partner

In a significant meeting held in New York, U.S., Vietnamese Prime Minister Pham Minh Chinh engaged with top executives from global giants, Apple included. During this meeting, the Prime Minister proposed that Apple continues its research endeavors and expands its investment cooperation within Vietnam, emphasizing the enhancement of localization rates. Simultaneously, Apple has been urged to serve as a conduit for U.S. businesses and Apple’s suppliers, facilitating increased investments in Vietnam. This collaborative approach aims to bolster Vietnamese businesses, enhancing their production capabilities and competitiveness, ultimately enabling them to take on an increasingly influential role within the global supply chain. Apple’s presence in Vietnam is not merely transactional; it signifies a transformative partnership that goes beyond manufacturing to bolster the country’s economic prospects.

Future Prospects and Opportunities for Growth in Apple’s Manufacturing

Shaping Apple’s Future Investments in Vietnam

The magnitude of Apple’s investments and expansion plans in the realm of Apple production in Vietnam has sent reverberations throughout the global tech industry. These trends are expected to persist and even amplify in the coming years. Apple’s strategic intentions and long-term objectives align with the nation’s economic development trajectory, underlining its commitment to shaping the future.

Implications for Vietnam’s Economic Development

The implications of these future trends extend far beyond the realm of Apple manufacturing. They have far-reaching impacts on Vietnam’s overall economic development and the nation’s positioning within the broader landscape of tech manufacturing. The robust growth and diversification of the manufacturing sector exemplify the nation’s resilience and adaptability.

Strategies for Enhancing Vietnam’s Attractiveness as a Manufacturing Partner

In light of these profound transformations, Vietnam is uniquely poised to take advantage of opportunities to further enhance its standing as a preferred manufacturing partner for not only Apple but other multinational tech companies. Strategies centered around advanced workforce development, improved infrastructure, and an attractive investment environment will be pivotal in reinforcing Vietnam’s appeal as a manufacturing hub. This evolution aligns with the broader vision of nurturing technological advancements, fostering innovation, and cementing Vietnam’s place in the global arena as a tech manufacturing powerhouse.

Final Thoughts

In summary, the influence of Apple’s manufacturing in Vietnam is undeniable, as it continues to transform the country’s manufacturing landscape. Our exploration has uncovered the multifaceted impact of Apple’s presence on the economic growth, local suppliers, and the nation’s position in the Apple’s production network. The manufacturing success which Apple has found in Vietnam signifies that the opportunities for growth in Vietnam’s manufacturing industry are boundless. This remarkable journey can be navigated effectively with Viettonkin‘s guidance, where we specialize in providing insights and strategies for those seeking to harness the potential of Vietnam’s potential in manufacturing. Explore our services to embark on a path of innovation and success in the dynamic realm of investment in the manufacturing industry in Vietnam. Your next step towards excellence starts here.

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