Foxconn leases new site in Vietnam as Apple contractor continues to diversify production away from China

Taipei-listed Foxconn, formally known as Hon Hai Precision Industry, has signed a lease with Saigon-Bac Giang Industrial Park Corp. Foxconn’s latest deal in Vietnam comes after its iPhone plant in Zhengzhou was rocked last year by worker unrest amid a Covid outbreak

Apple’s biggest contractor Foxconn Technology Group said it has secured a new site in Vietnam, as the Taiwanese giant pushes ahead with efforts to shift more production away from mainland China following major disruptions at its key manufacturing base late last year.

Taiwan-listed Foxconn, formally known as Hon Hai Precision Industry, has signed a lease with Saigon-Bac Giang Industrial Park Corp to occupy a plot of 45 hectares (111 acres) for around US$62.5 million to meet “operational needs and expand production capacity”, according to an exchange filing on Tuesday.

The site, located in the Quang Chau Industrial Park in Bac Giang province east of Hanoi, was rented through Foxconn’s subsidiary Fulian Precision Technology Component Co. The lease will run through February 2057, the company said.

Foxconn signed a US$300 million agreement with a Vietnamese developer last August to build a new factory in Bac Giang, where it already produces iPads and AirPods, Reuters reported at the time, citing state-run newspaper Tuoi Tre. The report did not mention the type of products that would be made at the new facilities.

Foxconn’s latest deal in Vietnam comes after its iPhone plant in the central Chinese city of Zhengzhou – the largest in the world and known as iPhone City – was rocked by an exodus of tens of thousands of employees and violent worker protests amid stringent pandemic control measures imposed during a Covid-19 outbreak that began in late October.

“Covid-19 challenges … significantly impacted the supply of iPhone 14 Pro and iPhone 14 Pro Max and lasted through most of December,” Apple chief executive Tim Cook said during an earnings call earlier this month, referring to the turmoil at Foxconn Zhengzhou.

The California-based tech giant surprised the market as it reported a revenue decline in the December quarter, blaming supply disruptions as a result of China’s pandemic controls. The company reported a 5 per cent year-on-year drop to US$117 billion in revenue for the quarter ended December, its first quarterly revenue decline since early 2019.

Amid the disruptions, Foxconn in late December finalised plans to relocate some of its MacBook production to Vietnam, with the first products expected to ship as early as May this year, according to a report by Nikkei Asia Review at the time.

Foxconn also plans to quadruple the workforce at its iPhone-making Indian plant over two years, according to reports by Reuters in 2022. The company announced a US$500 million investment in its Indian subsidiary in December.

Cook confirmed in the earnings call the company’s plans to continue to diversify the iPhone supply chain. “There are component parts coming from many different countries in the world, and the final assembly coming from three countries in the world on just the iPhone,” he said. “We’ll continue to optimise it over time.”

By Iris Deng – The South China Morning Post – 15 février 2023