The U.S.-China trade war could deliver iPhone assembler Foxconn’s work to Vietnam, experts say.
As several Taiwanese hardware makers shift production out of China to avoid U.S. tariffs, Taiwan’s Foxconn has recently acquired the right to use a property in an industrial park in northern Vietnam, and injected money into an Indian unit for “long-term investment”, Bloomberg reports.
Although there has been no official confirmation from Foxconn that it will start iPhone production in Vietnam, experts say that this is a possibility.
Economist Le Dang Doanh, former economic adviser to the Vietnamese government, said that Vietnam has the potential to host Foxconn operations because the country participates in multiple trade pacts, including the recently-ratified Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
“These trade pacts will allow Vietnam to export the iPhone to many country members with lower tariffs,” he told VnExpress International.
Nguyen Anh Tuan, a lecturer at the Ho Chi Minh City University of Technology, said that Vietnam would be a better destination than India as it has lower tariffs.
The “made in India” policy raised iPhone import tariffs to the South Asian country from 15 percent to 20 percent by the end of 2017, he told the Thanh Nien newspaper.
For this reason, Vietnam has a higher chance to host Foxconn operations, he added.
Foxconn has recently paid $16.5 million for the right to use 250,000 square meters of land in an industrial park in Vietnam’s northeastern Bac Giang Province for operations and sales.
While the Foxconn did not indicate the move was related to orders for Apple, in a separate filing the company said it was selling the Vietnamese land rights to a unit of Hong Kong-listed FIT Hon Teng, an iPhone cable and connector maker that it controls.
The move came after Reuters reported in December that Foxconn and the Hanoi People’s Committee were working together to open an iPhone manufacturing facility in Vietnam to negate the impacts of the U.S.-China trade war.
But other experts are not so optimistic that Vietnam will have better chances than India because of its weak labor skills and supporting industry.
Economist Nguyen Tri Hieu said that Indian workers have better English skills than Vietnamese, and Vietnam’s low number of supporting businesses means that Foxconn will have to import a lot of material if it were to operate in the country.
Vietnam also has lower credit ratings, he added. According to ratings firm Fitch, Vietnam’s sovereign credit rating is still at non-investment grade, while India is one rank higher at investment grade.
“This means that rating organizations advise investors not to invest in Vietnam. India’s market economy began long before Vietnam, so it is still a preferred destination for foreign direct investment companies,” Hieu told VnExpress International.
Foxconn, officially known as Hon Hai Precision Industry Co., had also injected up to $213.5 million into an Indian unit between September and January, the report said.