Key Apple partners plan expansion in Southeast Asia in 2023

Apple Inc. partners Foxconn Technology Group and Pegatron Corp. included Southeast Asia in their expansion plans for 2023, in a sign major global contract electronics manufacturers will continue to add production capacity outside China to mitigate geopolitical and economic risks.

“We will continue to grow our scale in mainland China, the Americas and Southeast Asia, and these efforts will blossom in 2023,” said Young Liu, chairman of Foxconn’s flagship unit Hon Hai Precision Industry Co., at a company event on Sunday.

Separately, Foxconn’s smaller rival Pegatron will allocate $300 million to $350 million this year to capital expenditure, partly to grow capacity in Southeast Asia and increase automotive component production in Mexico, company executives told reporters in Taipei on Sunday. Pegatron is also a Tesla Inc. supplier.

“Diversification of supply chain is an ongoing trend,” said Pegatron Co-Chief Executive Officer Johnson Teng.

In addition to producing iPhones in China, both Foxconn and Pegatron now make some of Apple’s iconic handsets in India. Apple is also turning to Vietnam as an alternative manufacturing base for other products including AirPods.

Pegatron will add capacity in Vietnam and Indonesia, where they already have existing plants, according to Vice Chairman Jason Cheng. The company currently doesn’t make Apple products in either country. Foxconn didn’t specify which Southeast Asian countries it plans to expand in.

Major contract electronics makers started to significantly build up their manufacturing presence outside China during the Trump era, as the then-US president imposed stiff tariffs on some Chinese imports as part of his trade war with the country. Some suppliers have been accelerating those diversification efforts amid prolonged Covid-induced lockdowns in China that have snarled supply chains.

Both Foxconn and Pegatron encountered Covid-related disruptions in China. Pegatron had to temporarily suspend production, and Foxconn was challenged by a violent protest that engulfed its main complex in the city of Zhengzhou, which disrupted the iPhone maker’s activity and forced Apple to warn shipments could come in lower than anticipated.