China’s supply chain ‘irreplaceable’ despite Covid-19 disruption and expansion in India, Vietnam, says contract maker of Xiaomi smartphones

DBG Technology Co, a contract manufacturer for major Chinese smartphone brands including Xiaomi, Honor and Huawei Technologies Co., is expanding its overseas production capacity amid Covid-19 related disruption in China although the country’s supply chain remains “irreplaceable”, according to a company executive.

The Shenzhen-listed company, whose main manufacturing sites are located in the neighbouring city of Huizhou, has been building its own Vietnam campus in northern Thai Nguyen province with the aim of producing 3 million handsets monthly in three years’ time, on top of its current rented factory area that makes over 100,000 smartphones per month, according to Xu Yusheng, board secretary of DBG.

Smartphone industry players are looking outward to get closer to overseas markets, said Xu, especially with domestic consumption softening. While orders at DBG’s Huizhou plants are still expanding year-on-year, its estimation for overall growth in 2022 is still “unclear” as smartphone clients are revising their 2022 performance targets, he added.

While it has become an “inevitable trend” for smartphone producers and other industries to set up manufacturing bases outside China recently, the process is “not a transfer, but rather a copy [of China’s supply chain],” Xu said.

“‘Made in Vietnam’ is never a replacement for ‘Made in China’, but an extension of that,” said Xu.

Xiaomi’s decision to tap Vietnam as its latest production base drew public attention as it followed similar moves by major global smartphone makers to move parts of their supply chain from China to Southeast Asia in search of lower costs and more stable production output during Covid-19.

US giant Apple, for instance, moved some of its iPad production from China to Vietnam last month after Covid-19 lockdowns in Shanghai and nearby regions disrupted production, Nikkei Asia reported.