Apple is reportedly moving some of its iPad production out of China to Vietnam in response to the strict lockdowns in Shanghai and surrounding areas due to the COVID-19 pandemic, according to a Nikkei Asia report.
Apple has also asked multiple component suppliers to build up their inventories to guard against future shortages and supply snags, sources said. In addition, China’s leading iPad assembler BYD is helping Apple build production lines in Vietnam, where a small number of the iconic tablets could soon be produced.
The lockdown over the past couple of months triggered by the pandemic’s fresh wave in Shanghai – the biggest outbreak in China since the pandemic began in Wuhan in late 2019 – has seriously disrupted supply chains for many electronics firms, including Apple. And even though the Chinese government began relaxing restrictions in Shanghai earlier this week, its determination to stick to its “zero-COVID” strategy leaves open the possibility that lockdowns could be reimposed should another outbreak occur.
Analysts think that Apple’s latest move is a sign of the company’s continued efforts to diversify its supply chain and less reliance on China. Furthermore, Vietnam has become an increasingly important manufacturing hub for the tech giant.
Last month, Apple CEO Tim Cook met with Vietnam Prime Minister Pham Minh Chinh at the Apple headquarters in California. The two talked about trade, investment, and finance, including stepping up Apple’s business activities in Vietnam.
Cook expressed his appreciation for Vietnam’s “favorable business environment for Apple’s operations.” According to him, Apple has been eyeing Vietnam as a possible expansion to its supply chain.
Global companies depend on China for a large portion of their manufacturing needs. But the COVID-19 pandemic has forced many to rethink their supply chains and look for ways to reduce their reliance on the world’s second-largest economy.
In April, at least 30 Taiwanese companies said that government COVID-19 control measures in eastern China had led them to suspend production for at least a week.
Unimicron Technology, for instance, said its Kunshan shuttered operations in April as it integrated resources and manufacturing to lessen the impact on customers. The chip substrate and printed circuit board maker also supplies Apple and Intel.
To deal with the lockdowns and continue operation, some companies adopted a closed-loop system, with workers isolated inside. This has been the case for the Kunshan automotive electronics operations of Wieson Technologies.
“We still expect the impacts on big multinational companies like Apple to be controllable. But the impacts on automotive, PC and some smaller Android phone makers could be more severe as they have a more rooted supply chain there that they are not likely to find alternatives to very soon,” said Ivan Lam, an analyst with Counterpoint, in a conversation with Nikkei Asia.