AirPods In Short Supply: Suppliers Seeking To Expand Production Capacity

According to The Information , two Chinese companies that build Apple's AirPods, Luxshare Precision and Goertek are negotiating with ban...

According to The Information, two Chinese companies that build Apple's AirPods, Luxshare Precision and Goertek are negotiating with banks to seek financing and plan to expand production in Vietnam.

The two firms have started trial production in Vietnam in order to minimize the negative effect of the trade war on AirPods. Chinese components can be transported by ground, sea or air to Vietnam. Furthermore, the labor cost of Vietnam is only one-third that of China. Plus, the Vietnamese government is providing subsidies and tax deductions to manufacturers who want to establish in Vietnam.

The person familiar with the loan discussions said that Vietnam accounts for a fraction of Luxshare’s and Goertek’s overall production but that the companies want to increase that share. The Vietnamese government has lent considerable support, in the form of subsidies or tax breaks, to manufacturers that want to set up in the country, the person close to Apple said. 

Since AirPods was released in 2016, the wireless earbuds have become an explosive product and have been out of stock constantly. This year, Apple released AirPods 2 and AirPods Pro, both of which have been strong in sales. Recently, Apple requested that Luxun Precision double its AirPods production capacity, as demand for AirPods Pro far exceeded expectations.

Industry analysis report shows that Apple's revenue from AirPods in 2019 will reach $6 billion, and AirPods sales may more than double in 2020 to 85 million shipments, which is expected to bring 15 billion U.S. dollars in revenues.