Luxshare Precision and Goertek, two Chinese companies who create components for Apple’s AirPods, are in talks with banks for funding to expand production in Vietnam, reports The Information.The two companies are seeking “hundreds of millions of dollars” to begin moving some production out of China amid continued trade tensions between the United States and China, and have already been trialing AirPods production in Vietnam.
Though there has been a recent deal between the U.S. and China to stave off additional tariffs, companies in China have no guarantee the deal will last, leading to uncertainty.
According to The Information, manufacturing in Vietnam is a “natural alternative” for Apple, given that Chinese components can be transported to Vietnam via land, sea, or air, and labor costs are roughly one-third of China’s. Vietnam’s workforce is also said to be “flush with fresh engineering graduates.” The Vietnamese government is offering subsidies and tax breaks to manufacturers who want to set up in the country.
Since their 2016 launch, Apple’s AirPods have exploded in popularity and there have been many months where Apple’s available AirPods supply has been unable to meet demand. Just this year, Apple released the AirPods 2 and the AirPods Pro, both of which have seen strong sales so far. Apple recently asked Luxshare Precision to double production of the AirPods Pro given the “much higher” than expected demand.
Both Luxshare Precision and Goertek have seen strong growth thanks to the AirPods, with their stock tripling on the Shenzhen Stock Exchange since the beginning of the year.
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