Apple Accelerates China Exit... Pegatron to Invest 432 Trillion Won This Year

[Asia Economy Reporter Yujin Cho] Apple’s partner companies are accelerating their escape from China by relocating production bases to Southeast Asia. This move aims to diversify production hubs away from China, Apple’s largest production base, to mitigate risks amid growing US-China strategic competition and supply chain disruptions.

According to Bloomberg on the 15th (local time), Liu Yangwei, chairman of Taiwan’s largest Apple partner Foxconn, stated, "We plan to continuously expand production scale in mainland China, the Americas, and Southeast Asia," adding, "These efforts to expand production bases will peak this year." This formalizes the goal of making this year the inaugural year for expanding production bases concentrated in China to North America and Southeast Asia. However, he did not specify which Southeast Asian countries will host new factories.

Foxconn’s competitor Pegatron also plans to invest up to $350 billion (approximately 432 trillion KRW) in relocating production bases to Southeast Asia and other regions. Johnson Teng, co-CEO of Pegatron, said, "Supply chain diversification is a global trend," and announced plans to invest $300 billion to $350 billion this year to expand production facilities in Southeast Asia and increase factory capacity in Mexico. Pegatron, also a Tesla partner, produces Tesla parts at its Mexican factory.

[Image source=AFP Yonhap News]

Jason Cheng, vice chairman of Pegatron, plans to expand existing factories in Vietnam and Indonesia to start producing Apple products. Since last year, Foxconn and Pegatron have begun producing Apple product lines outside China in Southeast Asia. Currently, iPhone and headphone product lines are partially produced in India, while other hardware product lines, including AirPods, are partially produced in Vietnam.

During the US-China trade dispute under the Trump administration, Apple insisted on maintaining production in China. However, as the risk of tariffs on China became apparent, Apple initiated moves to exit China. Subsequently, the company suffered another blow due to supply chain disruptions caused by the COVID-19 pandemic in 2020-2021.

The crisis spread beyond production to warehouses, logistics, transportation, and distribution, leading to temporary suspension of production in China. Foxconn’s factory in Zhengzhou, Henan Province, China?Apple’s largest iPhone production base?has faced production disruptions since the end of last year due to a surge in COVID-19 cases, government lockdown policies, and protests over working conditions. There are forecasts that these production disruptions may continue into the first half of this year.