Supply chain exodus from China to India, Vietnam faster than anticipated

Goertek, one of Apple's largest acoustic products suppliers, said its vice-president Kazuyoshi Yoshinaga is leaving the company, in a surprise move that comes just days after his remarks about Apple suppliers exiting China made headlines, South China Morning Post reported.

 

In a recent interview with Bloomberg, Yoshinaga was quoted as saying that Apple suppliers, including Goertek, have been moving manufacturing capacity out of China faster than observers had anticipated as US-China relations continue to deteriorate, laying bare the fact that China is losing some of its supply chain dominance to India and Vietnam.

China's stringent Covid-19 restrictions and intensified US-China tech rivalry have rattled Apple's supply chain over the last three years. Cracks have started to appear in the sophisticated supply chain that took the US tech giant decades to build, as companies from Taiwan's Foxconn Technology Group to China's Goertek and Luxshare increase their investments in India and Vietnam, two of the largest beneficiaries of a realignment in the global supply chain, South China Morning Post reported.

In a stock exchange filing, Shenzhen-listed Goertek said Yoshinaga was leaving for "personal reasons", without providing details. The statement did not mention his recent comments about the supply chain, and there is no evidence to show that his resignation was related to the fact that he painted a gloomy picture for the future of the Chinese manufacturing sector.

Last year, efforts by Foxconn's Zhengzhou plant to implement Beijing's zero-Covid curbs, while scrambling to churn out Apple's iPhone 14 orders, backfired, leading to violent clashes and a worker exodus that slowed production at the world's largest iPhone factory ahead of the holiday shopping season, South China Morning Post reported.

The incident forced Apple to admit for the first time that its once reliable Chinese supply chain had failed to deliver. In the wake of the fiasco, Apple has reportedly been asking its mainland Chinese-based suppliers to speed up plans to set up factories outside China, but neither Apple or its Chinese suppliers, including Goertek, Luxshare and Foxconn, have publicly acknowledged doing so.

Yoshinaga's remarks were the first time that a key player in Apple's Chinese supply chain not only acknowledged the problems, but said the exodus was happening "far faster" than anticipated, South China Morning Post reported.

The Chinese government has not made any public comment on Apple asking its suppliers to set up factories elsewhere, but the country has just emerged from three years of strict Covid curbs and Beijing is looking to shore up a slowing economy, vowing to secure its supply chain.

(Sanjeev Sharma can be reached at Sanjeev.s@ians.in)

--IANS

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