Chinese smartphone maker Xiaomi starts production in Vietnam to boost delivery efficiency

Chinese smartphone maker Xiaomi has recently delivered its first batch of products made in Vietnam, in an apparent bid to boost delivery efficiency in Southeast Asian markets and reduce logistics costs, the company said on Tuesday.

Delivery costs in Southeast Asian markets have increased due to the COVID-19 pandemic and logistics costs have risen in recent years, and in order to address these problems, the company has joined up with its partners to implement production localization, a Xiaomi spokesperson told the Global Times on Tuesday.

The Xiaomi handsets produced in Vietnam will be delivered locally as well as to other Southeast Asian countries, including Malaysia and Thailand, according to media reports.

Xiaomi’s move also comes as China and Vietnam are seeking to further expand bilateral cooperation. During a meeting between Chinese State Councilor and Foreign Minister Wang Yi and Vietnamese Foreign Minister Bui Thanh Son in Bagan, Myanmar on the sidelines of the seventh Lancang-Mekong Cooperation Foreign Ministers’ Meeting, both sides vowed to use the upcoming 14th Meeting of the China-Vietnam Steering Committee for Bilateral Cooperation as an opportunity to comprehensively sort out and coordinate the promotion of cooperation between the two countries in various fields, according to the Chinese Foreign Ministry.  

Setting up production lines in Vietnam or other Southeast Asian markets can improve both cost and delivery efficiency of Chinese handset makers, given the potential market demand and relatively low labor costs in the region, Ma Jihua, a veteran technology analyst, told the Global Times.

ASEAN has become China’s largest trading partner, and increasingly tight industrial cooperation between China and ASEAN will be the long-term trend for many industries, including smartphones, Ma said.

Alongside China’s industrial upgrading, some labor-intensive industries have started to relocate to Vietnam and other countries, starting with manufacturers of shoes, clothes and furniture.

Some electronic products manufacturers have also seen this trend in recent years, including China’s leading household appliance producer TCL and display screen maker BOE, according to media reports. One of China’s leading solar panel manufacturers, Trina Solar, also established a production line in Vietnam as early as in 2017.

Though some foreign media reports have been hyping the relocation of certain manufacturing firms out of China, it is actually a sign of “healthy” development that China’s industrial chains are relocating some of their downstream production capacity to places with lower costs, including some Southeast Asian countries, Ma said, adding that this is not only in line with China’s industrial upgrading, but could also help Chinese companies grow across the global market.

Relocating production from China to Vietnam and the broader Southeast Asia region is in fact a spillover effect of the expansion of Chinese industrial chains, which will lead to the integrated development of the two economies’ value chains, experts noted. To some extent, it means the supply chain network centered in China has grown larger, experts added. 

Meanwhile, Ma pointed out that despite Vietnam’s advantages in labor resources, location and other aspects, its capacity to undertake production from China is so far limited given its dependence on China for the supply of certain core equipment and parts.

Foreign direct investment to Vietnam grew by 7.8 percent year-on-year in the first five months of 2022, the highest level in five years, local media reported, citing official data.

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