If you thought that the chip shortage it was over because lately there was no news about it, you were wrong. Big companies like Manzana or Asus, as well as its production partners such as Foxconn and Pegatron have been working on the transfer of the production from China to Vietnam to alleviate this shortage, but they have run into a wall that seems insurmountable: they can’t find engineers, and the few that there are “suppose a labor too expensive”.
Vietnam has long been considered the next big chip production base, as companies want to diversify their supply chains to reduce dependence on China. However, due to the ongoing SARS-CoV-2 outbreak in the region, strict border controls and even local closures, Apple, Google, Amazon and their contract manufacturers will have trouble moving their production to Vietnam this year. However, there is a problem that seems even bigger: there are not enough engineers in Vietnam.
Moving factories from China to Vietnam?
The companies accelerated their efforts in 2018 after the United States began imposing punitive tariffs on devices made in China. In fact, both electronics contractors such as Foxconn and original equipment manufacturers (OEMs) such as Apple, Amazon, Dell, or Microsoft established their presence in Vietnam or expanded their operations to the country in recent years.
However, local factories and supply chains also require local engineers and worker training. Apparently, there are not enough engineers in Vietnam to build new supply chains or develop new products in collaboration with large suppliers. In addition, travel restrictions prevent engineers from other countries from settling in Vietnam to launch new product lines. Essentially, the Vietnam-based facilities can be made for something that is already being mass-produced elsewhere, making this country less competitive.
“Vietnam’s engineering workforce is still far from adequate.” said a supply chain executive who works with Apple and Google. “With all the travel restrictions, it is only feasible to manufacture in Vietnam products that are already in mass production elsewhere rather than developing new products from scratch in the country.”
Being one of the largest electronic product suppliers in the world, Apple was one of the first to move part of its production to this country. Currently, the company produces some of its headphones from the series AirPods in the country, but the vast majority of them are still made in China. The company hopes to make 20% of its AirPods in Vietnam at some point, but next-gen ones will start to be made in China.
The Cupertino plan also includes moving the production of iPad and Macbook to Vietnam, but the supply chain is incomplete and there are not enough local engineers, a problem that has been further exacerbated by the pandemic. The incomplete laptop manufacturing supply chain obviously affects not only Apple, but also other large laptop manufacturers such as Asus or Dell.
Amazon and Google have faced similar problems regarding chip shortages and manufacturing problems. Amazon has delays in the production of its devices such as smart speakers in Vietnam due to preventive measures from the outbreak SARS-CoV-2 since May; Google, in fact, had to choose China for the manufacture of its terminals Pixel 6.
Chip shortage worsens again
The transfer of the production of many products from China to Vietnam was also a palliative measure, not only due to US tariffs, but also due to the shortage of chips and raw materials for their manufacture; However, as we have explained, manufacturers seem to be encountering nothing but difficulties, which is not too surprising as China has also been building its ‘world factory’ status for several decades. and it doesn’t look like things are going to get any easier for Vietnam.
Analysts believe that the anti-pandemic measures imposed by the Vietnamese government will not last long because they are killing the country’s economy by leaps and bounds. However, gaining engineering talent and building complete and functional supply chains does not take two days, it is a process that takes many years, so suppliers will have to prepare to tackle this with patience, as there is a long way to go. in front of.