Apple Aims to Reduce Risks and Fuel Growth With Manufacturing Expansion in Vietnam

Apple’s decision to expand its manufacturing operations to Vietnam underscores a strategic effort to mitigate risks associated with over-reliance on China while capitalizing on opportunities for growth in emerging markets

By Raunak Bose
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Apple’s Expansion of Manufacturing to Vietnam Aims to Reduce Risks and Fuel Growth

Apple (Image via TechFirstNow)

Apple Inc. seems determined to broaden its investment to Vietnam, proving that it’s seeking to expunge its heavy dependence on China. This project, which was led by Apple’s CEO Tim Cook, concentrates on the expansion of Apple’s supply chain, improving the overall reliability of the chain, and capturing business opportunities emerging from developing markets.

Just a few days ago, Tim Cook took  a trip to Vietnam that entailed the announcement of plans to beef up the local tech industry with a specific emphasis on the development of Apple's supplier chain. The change only highlights the fact that Apple is already in the process of implementing the "China Plus One" policy where they try to avoid the risks associated with being too dependent on one particular place of manufacturing.

Apple's choice to develop a manufacturing base in Vietnam follows on the heels of increasing difficulties in China the company has encountered - e.g., supply chain troubles triggered by the COVID-19 disaster and intensifying political tensions between the two countries. Apple, in turn, has considered several options for the translocation of its factories, with Vietnam heading the list of the most probable ones thanks to its ample skilled workforce, favourable business environment and transcontinental market access.

Apple's move into Vietnam is not the first and it would not be the last since other companies had done so before. In the last couple of years, the major company has become more and more active in this country. Investments have reached levels of billions and lots of start-ups have received funding and support from the major company. Above all Apple’s major suppliers, having fully focused on the local operations such as Foxconn and Luxshare, confirmed Vietnam as a key Apple’s partner in the global supply chain market.

Apple’s Strategic Move in Response to US-China Relations

Evidently, Apple’s business in Vietnam started at the same time when the United States and China reassessed their trade links. China and the United States, the two economic powerhouses, are now moving towards their confrontation. This drives Apple to divert its production to Vietnam which may be seen as a step of a strategic pivot in order to lessen the geopolitical risks and ensure its uninterrupted operations.

Apple CEO Tim Cook with Vietnam's Prime Minister Pham Minh Chinh
Apple CEO Tim Cook (left) with Vietnam's Prime Minister Pham Minh Chinh

Politically, Apple’s decision to relocate production to Vietnam is in line with the United States’s strategy to intensify ties with Asian allies as a part of their engagement within the region, which is spurred by the growing rivalry with China. Southeast Asia’s place in the Biden administration’s recent diplomatic initiatives is a sign of the strategic role it plays as a tool of counter-balance to the expansionist policies of China.

Generally, Apple Company’s investment in Vietnam is predicted to probably bring about widespread effects on the economy. Through the global spread of its production, Apple aims to decrease the cost, bring enhanced operative flexibility as well as create opportunities to sell products in Vietnam’s market, which is developing favourably. It is expected that the development of this IT sector will lead to economic growth and create jobs, as a result, can have a positive impact on the development of the Vietnamese information tech ecosystem.

Nevertheless, the strategic shift by Apple to Vietnam goes hand in hand with some risks. The biggest challenges for the country include the problem of infrastructure, regulations, and labour-related issues that need to be corrected for the purpose of growth and sustainable development. Besides, rivalry in tech that comes up will enormously bring companies seeking returns on Vietnam’s potential could be going hard in future years.

Altogether, the move of Apple into Vietnam is an important step in the company's efforts to diversify its production locations and withstand any unexpected disruptions. Apple desires to not only offset potential risks that might occur from its heavily China-dependent supply chain by expanding its operations in Vietnam but also for long-term growth in one of the South East Asian most famous economies. In the context of the rapidly changing global tech landscape, Apple’s opting for Vietnam reflects the company’s ability to adapt well to the realities of the current world and the approach towards business which certainly will be fruitful in the future.

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