According to foreign media reports, Apple's two major foundries - Foxconn and Pegatron have recently said that they will include Southeast Asia in their expansion plans in 2023 to mitigate geopolitical and economic risks. In addition to making iPhones in China, Foxconn and Pegatron now produce some of Apple's models in India.
Apple is accelerating its supply chain globalization strategy, and Southeast Asia is Apple's most optimistic layout. Analysts point out that the share of Apple products made in India will reach 40-45% of overall shipments; Thailand could become a major production location for MacBooks; Vietnam will become an alternative manufacturing base for other products such as AirPods.
According to Apple's list of the top 200 suppliers in the past year, there were only 15 in Vietnam in 2018, and it rose to 21 two years later. Today, Vietnam has 31 apple factories and employs 160,000 workers. India is also the favored object of Apple CEO Cook, with Apple factories in India rising from 7 in 2018 to 9, accounting for 4.5%. Although the number is small, the Indian factory undertakes the production of Apple's core product, the iPhone series.
Source: Market Cap Watch's WeChat public account article on July 4, 2022: "China's "Fruit Chain" under Nanyang"
All the way to the southeast - A-share fruit chain listed companies are densely camped in India and Vietnam
Southeast Asian countries, led by Vietnam, are robbing Chinese companies of business at a speed visible to the naked eye. In order not to be squeezed out of the apple supply chain, Chinese suppliers in the industrial chain have heard the wind and set up factories in Southeast Asia to invest and build new nests.
According to Nikkei Asia and other media reports, in 2018 in order to avoid tariffs, Apple asked suppliers to transfer part of the production capacity out of China, starting in 2018, Luxshare Precision, Goertek, Wistron and Foxconn successively prepared production capacity in Vietnam and India, in 2019 Wistron began to produce iPhone old models in India, in 2020, nearly thirty percent of Airpods production capacity moved into Vietnam, in April 2022, Hon Hai India Chennai factory began to produce the latest iPhone 13 series, iPad, Mac, Watch and other production capacity have also moved into Vietnam.
According to market value observation, in 2021, a total of 21 fruit chain companies set up 23 factories in Vietnam, of which the largest number of companies from China, including Bern Optics, Goertek, Lens Technology, Lingyi Intelligent Manufacturing, Luxshare Precision, Meiyingsen and Yutong Technology, accounting for one-third.
Shen Xiaofeng, an analyst at Huatai Securities, pointed out in a research report released on October 20, 2022 that among China's fruit chain enterprises, A-share listed companies such as Industrial Fulian, Luxshare Precision, Wingtech Technology, Lens Technology, Goertek, TCL Technology, USI and Changying Precision have set up factories in Vietnam, A-share listed companies such as Industrial Fulian, Luxshare Precision, Wingtech Technology, TCL Technology, Sunwoda and Changying Precision have set up factories in India, in addition, some companies in Singapore, Malaysia, the Philippines, Indonesia and Thailand have also set up factories.
Analysts pointed out that the apple industry chain is more like a chain of interests, migrating to more "money" areas under changes in the global economic climate and grabbing higher profits. "Fruit Chain" enterprises have set up camp in India and Vietnam. However, in terms of profit distribution, Apple, standing at the top of the smile curve, holds the right to speak and even decide.
Irreplaceable Made in China - Apple and other multinational companies adjust their strategies to "China +"
It is worth noting that Foxconn's parent company Hon Hai Precision said at the 2021 annual results meeting that although the company gradually began to invest in Southeast Asia, the assembly efficiency in Southeast Asia may still be lower than that of mature regional factories within 4-5 years.
Shen Xiaofeng pointed out that the sequence of supply chain migration is assembly first, followed by simple components, but the overall speed is not fast. The assembly plant was the first to move to areas with intensive labor and low labor costs, and parts and fruit chain companies such as Lingyi Intelligent Manufacturing and Lens Technology have also successively built production capacity in Vietnam, but the original company location (such as Chinese mainland, Taiwan, China, etc.) still has the main production capacity.
Analysts pointed out that the size of factories in Southeast Asia is completely incomparable with factories in China. Zhengzhou Foxconn Apple's world's largest production base, with 300,000 workers, equivalent to a small city. Only 31 Vietnamese companies have gathered 160,000 people to produce iPhones, AirPods and other products.
More importantly, once the large-scale migration occurs, manufacturers will have to abandon the domestic production lines that cost huge amounts of money to build, and the park, and the management personnel who have spent years to train will inevitably be lost. The pain of the big ship's U-turn cannot be ignored. Taking Luxshare Precision as an example, its factory in Vietnam lost 7.34 million yuan in 2018, and the net profit reached 100 million yuan in 2019. Overseas business growth requires additional money and time investment, and without new business to undertake, small and medium-sized companies can hardly afford to lose both.
In addition, the experience of Chinese factories in manufacturing complex products in large quantities remains irreplaceable. Some analysts pointed out that it is not so much that Apple and other large multinational companies will "leave China", but more precisely, their strategy is adjusted to "China +". That is, China is the main production place, plus another country to supplement production.
However, China's fruit chain still needs to find new growth points for its business, and when the factory is really vacant in the future, new customers can support the domestic business. Otherwise, the abandoned factory buildings and production lines will become unbearable pain.