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lite.cnn.com - on gopher - inofficial
ARTICLE VIEW:
/
‘Perfect landing spot.’ Apple plans to spend more in Vietnam as it
looks beyond China
By Anna Cooban, CNN
Updated:
11:45 AM EDT, Thu April 18, 2024
Source: CNN
Apple is planning to buy more components from Vietnam, underscoring a
trend among global tech firms to look beyond China to secure their
supply chains, cut costs and open up new markets.
CEO Tim Cook made the pledge in a meeting with Vietnamese Prime
Minister Pham Minh Chinh in Hanoi Tuesday, according to a by
Vietnam’s government.
Apple () has already spent almost $16 billion through its supply chain
in the country since 2019, the government quoted Cook as saying. And
the company has created more than 200,000 jobs in Vietnam, it added.
According to the statement, Cook said Apple “stands ready … to
enhance cooperation and investment activities” in the Southeast Asian
country.
His visit highlights Vietnam’s to global companies looking for
alternatives to China as between Beijing and the West have escalated in
recent years.
Vietnam has been a “major beneficiary” of moves by multinational
companies to diversify their manufacturing hubs — a strategy known as
“China plus one” — says Thuy Anh Nguyen, a strategist at Dragon
Capital, a local fund management firm that invests solely in Vietnamese
companies.
Nguyen, whose firm manages $6 billion in assets, told CNN that labor
costs in Vietnam’s manufacturing sector are about half those in
neighboring China.
That has helped Vietnam go from producing mostly “low-value
products” like textiles to more tech products like iPhones and iPads,
she said. “Those are higher-value items. That’s how we move up the
value chain.”
Vietnam pulled in more than $4.29 billion in foreign direct investment
during the first two months of the year, up almost 39% from the same
period in 2023, to the country’s Ministry of Planning and Investment.
Most of the new investment went into the processing and manufacturing
sector.
A ‘perfect landing spot’
In recent years, fast-growing Asian economies like Vietnam and India
have emerged as alternative locations for manufacturers as ties between
Beijing and the West have frayed.
Vietnam is “the perfect landing spot for tech companies to diversify
outside China,” according to Dan Ives, a senior equity analyst at
Wedbush Securities, who pointed to the high number of trained engineers
in the country as one factor.
“We’re not just talking about (manufacturing of) low-cost
electronics,” he told CNN. “We’re talking higher up the value
chain… That was not even on the radar (of foreign companies) two
years ago.”
Once enemies in war, the United States and Vietnam have grown
increasingly close — the value of US imports of Vietnamese goods
soared more than 360% in the decade to end-2023 to top $144
billion, according to US government .
In September, the two countries formally upgraded their diplomatic ties
to a “comprehensive strategic partnership,” a symbolic yet highly
important move that positions Vietnam as a destination for more US
investment, including for like semiconductor chips.
Intel () has also taken note of Vietnam’s rise. In 2021, the company
$1.5 billion to a sprawling campus just outside Ho Chi Minh City,
which it will be its largest single assembly and test facility in
the world.
At the same time, relations between the United States and China have
deteriorated. A trade war between the two countries, which began in
2018 when Washington on many Chinese imports, ratcheted up last year as
both sides introduced tit-for-tat chipmaking .
During the pandemic, meanwhile, China’s strict zero-Covid policy ,
demonstrating the risks of concentrating production in a single
location.
Notably, the world’s biggest iPhone factory, located in central China
and owned by Taiwanese manufacturing firm Foxconn, was forced to
temporarily after workers revolted over fears of the spread of
coronavirus.
Consumer market
Vietnam has another advantage, says Nguyen: A booming, educated, and
youthful population. That’s a big draw for foreign tech companies
looking to hire workers for their factories, and for their products.
“Vietnam has a population of 100 million people. If it was in Europe,
it would be the biggest country,” she said, also noting that
smartphone adoption in Vietnam was rapidly increasing.
The International Monetary Fund expects Vietnam’s economy to growth
5.8% this year, much faster than the predicted of 3.2%. For 2025, the
fund forecasts growth of 6.5% in Vietnam. That’s not far off
India’s pace of expansion.
Still, Vietnam represents a far smaller market than India, which has
also been wooing large foreign companies, including Tesla (), to set up
factories in the country.
For now, Vietnam’s attractiveness to foreign firms is “more around
supply than demand,” says Ives at Wedbush Securities, while, for
India, it encompasses both.
Juliana Liu contributed reporting.
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