Apple to Produce AirPods in Vietnam in Shift Away From China

Apple will produce millions of its first-generation AirPods wireless earphones in Vietnam for the first time this quarter.
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Apple  (AAPL) - Get Report will produce millions of its AirPods wireless earphones in Vietnam for the first time this quarter, indicating the tech giant is stepping up its diversification of production out of China due to the coronavirus pandemic.

Roughly 3 million to 4 million units, or around 30% of total classic AirPods production this quarter, will be "Made in Vietnam," the Nikkei Asian Review reported on Friday, citing anonymous sources.

The relocation does not yet include AirPods Pro, which Apple introduced last October, according to the report.

The majority of the AirPods range are still produced in China, even though some wearable electronics devices have been  hit with additional tariffs imposed by the Trump administration since last year. Apple's iPhones and MacBooks have not yet been hit by tariffs, and are still mainly assembled in China.

The source said that mass production of AirPods in Vietnam started in March, with Vietnamese officials granting special permits to a key Apple AirPods assembler to help the company bring in engineers to the country for smooth production during lockdowns. Vietnam began easing some lockdown measures in late April.

AirPods, the most rapidly growing item in Apple's hardware product portfolio, are the world's best-selling wireless Bluetooth earphones. They commanded about 50% of the global market last year, selling around 65 million units, according to Counterpoint Research, which predicted sales would grow to up to 100 million units for 2020.

Apple had asked suppliers to evaluate plans to move around 15% to 30% of its hardware production out of China last year when trade tensions between the world's two biggest economies had reached their peak.

President Donald Trump on Monday threatened new tariffs on Chinese goods in retaliation to China’s handling of the virus outbreak, though tensions between the two countries seemed to dissipate toward the latter part of the week.

Apple did not immediately respond to a request for a comment. The shares were up nearly 1% to $305.30 in Friday trading.