Apple may select Vietnam to build facilities to avoid US tariffs

Apple is mulling over plans to move production out of China (Source: AFP)

US President Donald Trump more than two weeks ago warned to levy 10-25 per cent tax on the leading global tech firm’s best-selling products. This latest move in the US-China trade war is a serious threat to the firm, according to Bloomberg.

The US newswire also stated that Apple currently has no plans to remove its facilities from China. If Trump applies 10 per cent tariffs on the firm, it will keep running the facilities in China despite a significant impact. However, if the tariffs mount to 25 per cent, Apple may consider relocating facilities.

With the 10 per cent tax rate, Apple may suffer a $1 reduction in earnings per share. This loss would be $2.5 at a 25 per cent rate if Apple keeps running facilities in China.

If the tech firm’s plans come true, Southeast Asian countries, including Vietnam, is supposed to be its leading option to replace Chinese production. In fact, over the past few years, several Apple manufacturers like GoerTek and Cheung Uei have been planning to move manufacturing lines from China to Vietnam.

Similarly, at a meeting with the prime minister in the afternoon of November 22, Vu Tien Loc, director of the Vietnam Chamber of Commerce and Industry (VCCI), revealed that China-based Foxconn Group and the Hanoi People’s Committee are working together to open an iPhone manufacturing facility in Vietnam to negate the impacts of the US-China trade war.

The US government on September 24 officially applied 10 per cent tariffs on $200 billion worth of Chinese imports. It is forecast that as of the end of this year or the beginning of next year, the rate will be increased to 25 per cent.

According to a research released by China’s AmCham, two-thirds of the 430 US firms in China have been impacted by the trade war. Especially, 30 per cent are considering moving out of the country.

High-technology is one of the segments suffering the largest damage from the trade battle. Airpods, Apple Watch, and HomePod were Apple’s products listed in the $200 billion package of Chinese goods that were slapped extra tariffs on in September.