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ECONOMYINDUSTRY

US-China trade war may drive iPhone assembler Foxconn to Vietnam

Updated at Monday, 04 Feb 2019, 06:07
The Hanoitimes - No official confirmation from Foxconn on the establishment in Vietnam has been made but experts said that the vision is obvious.
Apple’s assembly partner Foxconn is reportedly considering setting up an iPhone manufacturing facility in Vietnam to mitigate the effects of the US-China trade spat, according to AppleInsider
Illustrative photo
Illustrative photo
Taiwan’s Foxconn has recently acquired the right to use a property in an industrial park in northern Vietnam, signaling the possibility of turning Vietnam into another iPhone manufacturing station. 

Remarkably, Foxconn’s move was made after several Taiwanese hardware makers shifted their production out of China to avoid US tariffs, according to Taiwanews

Economist Le Dang Doanh, former economic adviser to the Vietnamese government, said that Vietnam is of great potential to host Foxconn operations as the country has joined multiple trade pacts, including the recently-ratified Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

These trade pacts will allow Vietnam to export iPhones to many member countries with lower tariffs, Doanh told newswire VnExpress.

Sharing the same point, Nguyen Anh Tuan, a lecturer at the Ho Chi Minh City University of Technology, said that Vietnam would be a better destination than India as it has lower tariffs.

The “Make in India” policy raised iPhone import tariffs to the South Asian country from 15% to 20% at the end of 2017, the Thanh Nien newspaper quoted Tuan as saying. For this reason, Vietnam appears to be a better choice, he added.

Foxconn, 
officially known as Hon Hai Precision Industry Co., did not indicate that the move was related to orders for Apple and the company.

However, in December 2018, Reuters reported that Foxconn and the Hanoi People’s Committee were working together to open an iPhone manufacturing facility in Vietnam to cope with the negative impacts of the US-China trade war.

 
Inside a Foxconn's plant in Vietnam. File photo
Inside a Foxconn's plant in Vietnam. File photo
In 2007, Foxconn invested US$5 billion into Vietnam to build a plant in the northern province of Bac Ninh. The more-than-a-decade operations in Vietnam should be an advantage for the Taiwan-based giant to continue expanding investment in the country. 

For years, Taiwan ranks among Vietnam’s top 10 biggest investors. So far, Taiwanese companies have poured roughly US$31 billion in more than 2,530 projects in Vietnam. 

Concerns remain 

Other experts, meanwhile, are not so optimistic about the possibility of having more chance than India because of Vietnam’s weak labor skills and supporting industry.

Economist Nguyen Tri Hieu said that Indian workers have better English skills than Vietnamese, and Vietnam’s low number of supporting businesses means that Foxconn will have to import a lot of material if it operated in Vietnam.

In terms of credit, Vietnam also has lower credit ratings. Vietnam’s sovereign credit rating is still at non-investment grade, compared to investment grade in India, according to ratings firm Fitch.

Hieu told VnExpress that India’s market economy activated long before Vietnam’s, making it a preferred destination for foreign invested enterprises (FIEs).
Linh Pham
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