Apple leans on Vietnam for Apple Watch and MacBook production

The news: Apple Watches and MacBooks could be made in Vietnam for the first time as American tech companies diversify production away from China.

The opportunity: With relations between the US and China at risk of deteriorating, manufacturers like Apple are seeking out partners in Southeast Asia to shift production, per Nikkei Asia.

• Apple suppliers Luxshare Precision Industry and Foxconn are testing production of the Apple Watch in northern Vietnam with the aim of producing the device outside of China for the first time.
• Vietnam already manufactures Apple’s iPads and AirPods, so shifting Watch and MacBook lines could be a natural extension of existing agreements.
• Vietnam is a manufacturing hub for Samsung, Intel, and LG—expanding Apple production will generate substantial gains for the local economy and establish Vietnam as a burgeoning market.

The bIg takeaway: Vietnam is already Apple's most important production hub outside of China, producing a range of flagship products. But it’s unlikely that Apple can or will shift iPhone production over from China anytime soon. 

• Beyond being the producer for Apple’s iPhones, China is also a growth market for smartphones. Apple shipped 9.9 million iPhones in China in Q2, per Canalys, up 25% year over year.
• Not only would moving iPhone production away from China be expensive and disruptive for Apple; it would risk reprisal from Chinese consumers who have many locally manufactured smartphone brands to choose from.

Despite short-term challenges like building new factories in Vietnam, hiring staff, and maintaining quality standards, diversifying production can ensure more consistent output and less reliance on China.