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Google's EMS and ODM partners — such as Compal, Foxconn, and Pegatron — have significantly expanded manufacturing capacity in India and Vietnam in the past several years, although China still accounts for a meaningful portion of their production capacity. In a bid to reduce reliance on China, Google reportedly shifted production of some of its high-end Pixel smartphones to Vietnam this year and remained satisfied with the outcome. Since building premium handsets is considerably more complicated than assembling smartwatches or wireless earbuds, the progress with Pixel phones reportedly gave Google confidence that it could shift the rest of the lineup out of China in 2027. If the plan materializes, Google will become the second global smartphone brand after Samsung to relocate smartphone production from China to other countries.
Vietnam is particularly attractive for Google because Samsung has already established an extensive smartphone manufacturing ecosystem in the country that Google can tap into.
Google also has considerably fewer reasons than Apple to preserve its Chinese manufacturing footprint because Pixel smartphones are by far not as popular as iPhones and they are also not sold in China. Google expects Pixel smartphone shipments to grow by 8% – 10% from approximately 12 million units last year, which is an order of magnitude lower compared to iPhone sales per annum.
Despite rising component costs, Google's strategy for Pixel this year is reportedly focused on maintaining unit shipment growth. A supplier working with Google and Xiaomi reportedly told Nikkei that Google is among the few smartphone vendors that have not reduced their shipment forecasts this year, which is not particularly surprising as its unit sales are modest. Yet, it remains to be seen whether the company can both relocate production and increase output of handsets at the same time.
Google could build more AI accelerators than Nvidia sells in 2028, analyst claims
China is considering export controls on AI technologies, including banning local companies from using TSMC, report claims
Consumer electronics brands like Apple and Google are shifting production away from China primarily due to escalating China – U.S. geopolitical tensions, which result in punitive tariffs, export controls, and the risk of sudden disruptions. As an added bonus, adding production capacities in countries like India and Vietnam automatically improves supply-chain resilience and reduces over-reliance on a single country. Rising labor and regulatory costs in China, combined with attractive incentives and growing manufacturing ecosystems in places like India and Vietnam, further encourage diversification. Meanwhile, companies like Foxconn or Pegatron do not abandon their China operations and continue to build products not meant for the U.S. market there.
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Key considerations
- Investor positioning can change fast
- Volatility remains possible near catalysts
- Macro rates and liquidity can dominate flows
Reference reading
- https://www.tomshardware.com/phones/SPONSORED_LINK_URL
- https://www.tomshardware.com/phones/google-to-stop-making-pixel-devices-in-china-report-claims-india-and-vietnam-prime-candidates-for-manufacturing-shift-owing-to-beijing-washington-tensions#main
- https://www.tomshardware.com/membership
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