For a long time, Vietnam has been considered the next major production base because the company hopes to diversify its supply chain to reduce its dependence on China. However, due to the continued SARS-CoV-2 outbreak in the region, strict border controls, and even local blockades, Apple, Google, Amazon and their contract manufacturers will face the problem of shifting production to Vietnam this year. However, there is a bigger problem: Vietnam does not have enough engineers.
For some time, large companies such as Apple and Asustek, as well as production partners such as Foxconn and Pegatron, have been working to transfer production from China to Vietnam because the world’s labor force has become more and more expensive.
After the United States began to impose punitive tariffs on Chinese-made equipment, these companies stepped up their efforts in 2018. According to the report, in fact, contract manufacturers of electronic products such as Foxconn and original equipment manufacturers (OEMs) such as Apple, Amazon, Dell and Microsoft have either established or expanded their operations in Vietnam. Nikkei.
But local factories and supply chains need training of local engineers and local workers. Obviously, Vietnam does not have enough local engineers to establish a new supply chain or cooperate with large suppliers to develop brand new products. In addition, travel restrictions prevented engineers from other countries from coming to Vietnam to launch new product lines. Essentially, Vietnam’s facilities can be used to manufacture products that have been mass-produced elsewhere, which greatly reduces Vietnam’s competitiveness.
“[Vietnam’s] A supply chain executive serving Apple and Google said in an interview with Nikkei that engineering labor is still far from enough. “Due to all travel restrictions, it is only feasible to produce products in Vietnam that have already been mass-produced elsewhere, rather than starting to produce upcoming products from scratch in the country.”
As one of the world’s largest suppliers of electronic products, Apple is one of the most cutting-edge suppliers that transfer part of its production to Vietnam. The company currently produces some AirPods series headphones in China, but most of them are still made in China. The company hopes to eventually produce 20% of AirPods in Vietnam, but the upcoming next-generation AirPods will begin production in China first.
Apple’s plan also includes the transfer of part of the iPad and MacBook production to Vietnam, but the supply chain is incomplete and local engineers are insufficient. This problem is further exacerbated by the pandemic. The incomplete notebook manufacturing supply chain obviously affects not only Apple, but also other notebook computer suppliers.
Amazon and Google are also facing similar problems. Since May, due to preventive measures against the SARS CoV-2 outbreak, Amazon’s production of smart speakers and other equipment in Vietnam has been facing delays. Google had to choose to produce Pixel 6 smartphones in China.
So far, transferring the production of many products from China to Vietnam has proven to be a daunting task. This is not surprising, because China has been building its “world factory” power for decades, and the situation in Vietnam does not seem to get easier.
Analysts believe that the anti-epidemic measures implemented by the Vietnamese government will not last long because they are essentially stifling the country’s economy. However, it takes years to acquire engineering talent and establish a supply chain, so suppliers may have to make long-term preparations for this.