The two Chinese manufacturers of Apple’s wireless earbuds are each in talks to borrow hundreds of millions of dollars from banks to expand production in Vietnam, according to a person familiar with the matter.
The discussions come as a growing number of electronics manufacturers move some operations out of China as a hedge against trade tensions between China and the U.S.
The two Apple suppliers—Luxshare Precision and Goertek—make a number of accessories and components for the iPhone maker, including the AirPod, which has become a hit since its first release in 2016. Both Luxshare and Goertek have benefited from strong consumer demand for AirPods, analysts say. The price of their stocks, which are traded on the Shenzhen Stock Exchange, has more than tripled since the beginning of the year.
Vietnam is looking to be the next best alternative, due to its close proximity to China and therefore, close access to the parts via air, sea or land. Moreover, labor costs are about a third of China’s, and the current workforce is full of fresh graduates in engineering. The government is offering tax breaks and subsidies to those who would want to set up a business in the country.
The Apple AirPods have recently gone up in popularity, prompting demand and strong sales. Goertek and Luxshare Precision have enjoyed strong growth and rising market shares since 2019.
Vietnam is on track to attract nearly 40-billion U.S. dollars in foreign direct investment this year. That word comes from Vietnam’s government — which says it’s the highest inbound investment figure in ten years.
And money for manufacturing and other projects is coming from elsewhere in the region. This year, South Korea is the country’s biggest source of outside financing — making up more than 20% of all foreign direct investment flowing to Vietnam. Second is Hong Kong — with nearly the same amount.
Singapore, Japan and China round out the top five foreign investors in Vietnam this year. U.S. firms are also increasing their presence in Vietnam — sometimes by way of their suppliers. Apple’s largest assembly contractor Foxconn has recently increased its presence in Vietnam.