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    The Changing FDI Picture: Toward Enterprises in Adjusting Economic Decision

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    Linh Lê
    Apple and other companies that manufacture iPhones are moving some of their production out of China due to ongoing trade tensions and risks of depending heavily on China. Up to 30% of AirPods production is moving to Vietnam. Wistron is moving 50% of its production capacity out of China within a year, and Foxconn plans to invest $1 billion in India to increase iPhone production capacity there. The trade war has accelerated changes in global supply chains and reduced China's role as the world's primary factory.

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    The Changing FDI Picture: Toward Enterprises in Adjusting Economic Decision

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    Linh Lê
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    Apple and other companies that manufacture iPhones are moving some of their production out of China due to ongoing trade tensions and risks of depending heavily on China. Up to 30% of AirPods production is moving to Vietnam. Wistron is moving 50% of its production capacity out of China within a year, and Foxconn plans to invest $1 billion in India to increase iPhone production capacity there. The trade war has accelerated changes in global supply chains and reduced China's role as the world's primary factory.

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    Apple and other companies that manufacture iPhones are moving some of their production out of China due to ongoing trade tensions and risks of depending heavily on China. Up to 30% of AirPods production is moving to Vietnam. Wistron is moving 50% of its production capacity out of China within a year, and Foxconn plans to invest $1 billion in India to increase iPhone production capacity there. The trade war has accelerated changes in global supply chains and reduced China's role as the world's primary factory.

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    © All Rights Reserved
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    7 views2 pages

    The Changing FDI Picture: Toward Enterprises in Adjusting Economic Decision

    Uploaded by

    Linh Lê
    Apple and other companies that manufacture iPhones are moving some of their production out of China due to ongoing trade tensions and risks of depending heavily on China. Up to 30% of AirPods production is moving to Vietnam. Wistron is moving 50% of its production capacity out of China within a year, and Foxconn plans to invest $1 billion in India to increase iPhone production capacity there. The trade war has accelerated changes in global supply chains and reduced China's role as the world's primary factory.

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    2.1.

    Toward enterprises in adjusting economic decision

    2.1.1. The changing FDI picture

    Since 2018, the US-China trade tensions, the trend of protecting domestic production ...
    have caused the flow of investment in the world to decline (over 10% in 2018 and 2019),
    at the same time there is a strong shift between regions and countries. In that trend,
    ASEAN countries, including Vietnam, are emerging as potential destinations, as
    destinations for the reallocation of investment flows, especially the trend of capital flows
    from China. According to Nomura Group (2019), from the beginning of 2018 to August
    2019, 56 international enterprises have left China to produce in other countries; of which,
    26 businesses chose Vietnam, 11 went to Taiwan, 11 went to Thailand, 3 went to India ...

    One of the big companies looking to pull out of China is Apple.

    This decision was made in the midst of a prolonged trade war between China and the US
    that showed no signs of cooling off.

    However, sources say that even if the trade war is resolved, Apple will not change their
    plans. Because, Apple has evaluated that the risks of depending too much on the
    production line in China are too great and even increase.

    In addition, this act of Apple also creates a trend that has made significant changes in
    global FDI. For example

    + Wistron, one of the partners producing components for Apple, recently said it would
    move 50% of production capacity out of China within 1 year. The COVID-19 pandemic
    presented a huge risk for investors following the “put all their eggs in one basket”
    strategy and Wistron's statement is a prime example of this correction.

    + Foxconn is planning to invest up to 1 billion USD in India to help Apple increase


    production capacity of iPhone models.

    + Especially there is information that Apple will produce AirPods in Vietnam instead of
    China (3-4 million units, equivalent to 30% of AirPods products)

    2.1.2 Changing World Order:


    The US-China trade war:
    Apparently, Apple is looking to move some iPhone manufacturing out of China. The
    current relationship between the US and China continues to deteriorate rapidly, and the
    fact that Apple continues to manufacture iPhones in this country could pose great risks.
    That is because there is always the possibility that the US Government will take some
    action leading to Chinese retaliation.

    2.1.2.1 Apple urged component manufacturers to leave China


    - All Apple partners acknowledge that China is no longer the most suitable and
    economical place to manufacture iPhones.
    - According to Nikkei Asian Reviews, Apple urged major supplier partners to
    consider relocating 15-30% of iPhone production out of China. Meanwhile, Data
    Electronics Inc. specializes in supplying components to Apple are also planning to
    buy a branch in Thailand to expand production and reduce costs.
    - In June 2019, Foxconn President Young Liu frankly admitted that Foxconn may
    have to manufacture iPhones outside of China to avoid damage from US-China
    trade tensions.
    - Foxconn's factories in China have experienced many fluctuations in the past. This
    company along with two other Taiwanese iPhone assemblers, Pegasus and
    Wistron, have moved their production lines to India or Southeast Asia.
    => Bloomberg quoted Foxconn President Young Liu telling reporters after the release of
    their financial statements."Regardless of whether India, Southeast Asia or the US,
    each place will have a manufacturing ecosystem. Although China still plays an
    important role in Foxconn's manufacturing empire, the days when China is The
    world factory is over"
    => That means: China will no longer be the world's iPhone factory

    2.1.2.2. Affected countries when manufacturing enterprises leave:


    Pros: Other countries not subject to tax have alternative sources of goods
    - Vietnam: telephone components, automatic data processing machines
    - Taiwan: typewriter components, office machines, phone accessories
    - Chile: copper ore
    - Malaysia: electronic circuits, semiconductor equipment
    Cons: Asian economies engage in intermediate trade between China and the US
    -South Korea, Japan and Taiwan could suffer if the trade war with the US forces China to
    change suppliers of semiconductors. Chinese companies each year import about $ 200
    billion of microchips, mostly from Korea, Japan and Taiwan, to manufacture phones and
    electronic components.

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