Apple AirPods Suppliers Seeking Funding For Production Outside of China

Apple AirPods
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Apple AirPods
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Photo Credit: Unsplash

The world’s leading tech giant, Apple, has been struggling to keep up with the demand for its AirPods, which have sold over $6 billion this year alone. The AirPods Pro, launched in October, were sold out for the holiday season, leaving many consumers turning to purchase the earbuds from scalpers on sites like eBay with as much as a 100% mark-up. The increased demand for AirPods is one reason why two Chinese companies that create components for Apple are looking to expand their production lines outside of China.

Luxshare Precision and Goertek are seeking to raise funding in the ‘hundreds of millions of dollars’ to expand their production lines in Vietnam. The move is a result of trade tensions between the United States and China, with both companies looking to avoid potential tariffs on Chinese exports. AirPods production trials in Vietnam have been underway for months now, and the country is offering subsidies and tax breaks to manufacturers who relocate. Vietnam is a ‘natural fit’ for Apple since components can be moved by land, air, or sea from China with no red tape. Labor costs in Vietnam are also roughly one-third of China’s, and the country has a new workforce of engineering graduates to employ.

The recent deal between the U.S. and China to stop additional tariffs has no guarantee it will last, which has led to the production line move. Both Luxshare Precision and Goertek have grown to keep up with demand, with stock in both companies tripling on the Shenzhen Stock Exchange since the start of 2019. The uncertainty surrounding the trade relationships has pushed companies to look for alternative manufacturing bases, and Vietnam is emerging as a top choice.

Apple AirPods accounted for over 50% of the ‘hearables’ market, according to a report from November 2019. The current wait time for AirPods Pro still sits at over three weeks, and the demand is expected to increase even further. Analysts predict that the AirPods sales will double in 2021, and Apple needs to increase its production lines to meet the demand. The company is facing little competition in this category this year, as both Microsoft and Google delayed their earbuds to the next year.

Apple’s production move to Vietnam is not only a response to trade tensions but also a strategic move that would help the company to diversify its supply chain and reduce its reliance on China. The company has faced criticism in the past for its heavy reliance on Chinese manufacturers, and the move to Vietnam would help to distribute some of the risks involved in its supply chain. The move would also help to avoid any potential disruptions that may arise due to geopolitical tensions or natural disasters.

In conclusion, Luxshare Precision and Goertek’s expansion to Vietnam is a strategic move that would help to reduce the risks involved in their supply chain. Vietnam’s labor costs and its new workforce of engineering graduates make it an attractive destination for manufacturers, and the country is offering subsidies and tax breaks to attract more companies. Apple’s decision to increase its production lines in Vietnam is a response to trade tensions and its need to meet the increasing demand for its AirPods. The move would help to diversify Apple’s supply chain and reduce its reliance on China, which has faced criticism for its human rights violations and geopolitical tensions.