COVID-19 outbreak enhances trend of "make where you sell"

Vietnam Investment Review

Apple has accelerated the shift to Vietnam due to COVID-19

The COVID-19 outbreak is accelerating the shifting of corporate mindsets on diversifying from China and onboarding the trend of “make where you sell”. That may be the main reason behind Apple's rellocation in manufacturing lines in Vietnam.

The local market has recently been in a panic due to the news that 30 per cent of the US-based Apple's AirPods products will be made in Vietnam.

"The mass production of AirPods in Vietnam started as early as in March," the Nikkei Asian Review quoted a person familiar with the matter as saying. "The Vietnamese officials even granted special permits for a key Apple AirPod assembler to help the company bring engineers into the country for smooth production during the lockdown."

Similarly, its biggest competitor - South Korea-based Samsung has boosted its manufacturing lines in the country. Specifically, Samsung smartphones are manufactured in Bac Ninh and Thai Nguyen during the health crisis, while its manufacturing lines in India were interrupted. Even Apple researched the local market to open facilities that are similar to China.

It could be seen that Southeast Asia has been risen up as a new hub for global production on behalf of China. According to the Financial Times, the US-China tensions and COVID-19 have emphasised the hazards of dependence on a single nation for production, leading to a fresh focus on the 700-million population region.

With such rapid urbanisation and industrialisation, young population, and high capability to adopt the digital transformation, Southeast Asia is ready to get a new place in the world.

The area can take advantage of the prolonged experiences of the development of nearby countries thanks to the huge potential of its internal market. Accordingly, about 60 per cent of the trade volume in Asia stem from internal economies led by Japan, South Korea, Taiwan, Hong Kong, and Singapore.

The ASEAN, India, Japan, Australia, and China are occupying about 40 per cent of the globe's GDP. The number of Chinese proposals for technology investment in Southeast Asia has increased as much as four times against 10 years ago. In the first half of 2019, Chinese venture capital investors poured $650 million into Southeast Asian technology firms, according to Refinitiv.

Moreover, Vietnam's export volume to the US grew by 40 per cent in 2019 while the Chinese export volume to the market dropped by more than 20 per cent. Also, Southeast Asia lured in $150 billion of foreign capital last year, less than the $200 billion investment in China, but higher than the $50 billion investment fuelled to India.

Accordingly, money flows into the area will keep increasing as the EU has essentially reached a free trade agreement with the ASEAN. Accordingly, many multinational companies are attempting to diversify their business lines to Southeast Asia.

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