Business News 23/04/2024, 07:27

Why does Tim Cook consider Vietnam an important part of Apple's supply chain?

CEO Tim Cook's recent visit increasingly demonstrates the importance of Vietnam in Apple's supply chain.

Why does Tim Cook consider Vietnam an important part of Apple's supply chain?

In the past few days, Apple CEO - Tim Cook has visited and worked in Vietnam, which promises to open up many opportunities for supply chain development. Specifically, this group will announce the increase in spending for suppliers in Vietnam, as well as continue to expand programs in the Employee Development Fund, with a total value of 50 million USD.

This visit of Mr. Tim Cook is part of a series of activities to strengthen the US technology company's commitment to sustainable investment in Vietnam. In particular, the visit also took place in the context of US-China trade tensions that are forcing US companies to diversify their supply chains.

China is still the center of Apple's supply chain. According to data from Bloomberg, by 2023, up to 80% of Apple's partners are based in this country. However, China's rapid economic growth has begun to push up manpower prices. China's Zero-Covid policy in recent years has also hindered the supply chain of electronic goods in the country. In particular, the administration of President Joe Biden is making efforts to prevent China from accessing high-end US electronics such as semiconductors, due to fears of the country's ability to develop artificial intelligence. According to Bloomberg estimates, technology companies will move up to 30% of production out of China to Southeast Asia in the next two years.

On the other hand, Vietnam is a promising investment destination for American technology companies, especially Apple. The number of companies assembling Apple products in Vietnam has quadrupled in the past 10 years.

Nhà máy của nhà cung ứng cho Apple Foxconn và Luxshare tại Bắc Giang

Factory of Apple supplier Foxconn and Luxshare in Bac Giang. Photo source: Linh Pham, Bloomberg

In the Financial Times, analysts said that the reason for this supply chain shift is that labor in Vietnam is more affordable than in China. In addition, the labor participation rate in Vietnam is quite high, with more than 75% of the population being of working age. Vietnam also shares a border with China, creating an effective supply chain for Apple.

Besides, Vietnam is also attracting technology manufacturers from the US with tax reduction policies and affordable land leases. Provincial and local officials are also paying a lot of attention to Apple, regularly contacting its representatives and providing dormitories to factory workers in the supply chain. As a result, many suppliers in Apple's supply chain have seen increased profits. Specifically, last year, the stock price of Apple's two suppliers Quanta Computer and Compal Electronics increased by 30%, after these two companies invested in Vietnam.

According to a report from JPMorgan, factories in Vietnam are expected to produce about 20% of all iPads and Apple Watchs by 2025. Meanwhile, the expected production of MacBook is 5% and AirPods reach 65%.


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