From inefficient to pioneer: notebook supply chain's early shift to Vietnam

Ninelu Tu, Taipei; Jack Wu, DIGITIMES Asia 0

Apple is among the US-based notebook brands that moved to Vietnam. Credit: DIGITIMES

Due to the continued rise of labor costs, establishing a second supply chain for the notebook industry outside of China is a discussion topic that surfaces now and then. However, considering the overall benefits, only a few companies have attempted it. It wasn't until the tension between the US and China in 2018 did this topic receive more attention. Nevertheless, most companies elected to remain cautious and observe how things will develop.

However, the Covid pandemic in 2020 caused a global supply chain breakdown due to China's lockdown measures. With brand clients requesting a "China+1" option, the notebook supply chain went into motion. The first wave of companies that made the shift to Vietnam suddenly went from inefficient to pioneers in the eyes of brand clients.

Notebook brand manufacturers mostly chose North Vietnam as their production sites. The primary reason is that for the "China+1" solutions provided by ODMs, Vietnam offers both geography and labor benefits. Geographically, Vietnam is in direct proximity to China, making it convenient to transport components. Labor-wise, ODMs are already manufacturing notebooks and smartphones in Vietnam. Both the local government and workforce are quite familiar with the electronics assembly industry.

Foxconn and Compal were among the earliest companies to establish factories in Vietnam. For example, Compal announced back in 2007 that it was establishing a factory in Vietnam to diversify risks. Unfortunately, the timing wasn't right yet and clients were not on board. It was only until the current wave of the US-China trade war that US brand factories started to actively relocate. Vietnam once again became a popular location for production sites.

Among the US-based notebook brands that shifted their production to Vietnam, Dell and Apple are the most active. Dell mainly outsources its manufacturing to Compal and Wistron, while Apple outsources to Foxconn and Quanta. HP's new production sites are mainly in Mexico, with Thailand as its choice in Southeast Asia. The first wave of mass production is expected to come out of Quanta's Thailand factory in the first half of 2024. The next step will be to consider producing in Vietnam.

In terms of notebook assembly, Vietnam is already the largest production hub outside of China. Compal, Wistron, and Foxconn have all started mass production and shipments. It's estimated that once Quanta begins mass production, the proportion of notebook production in Vietnam will increase again.

Quanta announced that its Vietnam QMH F1 factory will begin construction on July 25, 2023. with an expected completion date of February 1, 2024. The investment for this project is about VND 514.962 billion (approx. US$22 million).

Compal already has two factories in the Vĩnh Phúc province, with production lines that mainly produce networking and smart handheld devices. PC-related products have also started small-scale production in 2022. Compal announced in December 2022 the construction of its third factory at the Lien Ha Thai Industrial Park, expected to complete in 2024. Products include both PCs and non-PC products.

Wistron began construction for two factories in the Dong Van III Industrial Zone in November 2019. Construction was completed in 2020 and mass production began in 2021, with PC and displays as the main products. However, these two factories have reached nearly full capacity by early 2023. Therefore, Wistron plans to establish a third factory. Mass production is expected to start in 2024, with notebooks as the main product.

Foxconn, which started establishing factories in Vietnam back in 2007, had two initial factory sites in Bắc Ninh province. In 2020, Foxconn made additional investments in Vietnam, selecting Bắc Giang province as the location to set up new production capacity. It's reported that this new factory will mainly produce notebooks and tablets, with an annual capacity of around 8 million units.

Supply chain sources admitted that the previous wait-and-see approach was disrupted by customers during the pandemic. Customers demand a second production supply chain, thus making the southbound move a necessity. Even if it's just setting up a shipping warehouse, it needs to be able to supply the demand of local customers.

Some companies didn't move to places like Vietnam due to the current demand in the notebook supply chain but for other reasons. For instance, Foxlink's operations in Vietnam were focused on PCBA. Its new factory will focus on game console controllers and headphone systems assembly.

Merry and Luxshare's joint venture in Vietnam focuses on wearable headphone products. Lotes' products are more related to servers. Darfon's Vietnam plant, besides producing keyboards, mainly focuses on green energy products like bicycle frames. Some companies focus on end applications like automotive and networking.

While their purpose wasn't all to support the notebook supply chain, industry sources admitted that establishing production lines outside of China has become a necessary task. This trend will not be limited to Vietnam. In the future, the entire world will be considered as long as the customer or supply chain demands it.