With the trade war between the U.S. and China heating up, American companies are looking for ways to minimize the impact of tariffs. President Trump has been putting pressure on American companies to move their production out of China, and Google is apparently heeding that command. While the trade tensions between China and the U.S. are one reason for the move, Google is also feeling the pressure of increasing Chinese labor costs.
Google is moving aggressively to shift Pixel smartphone production to Vietnam and has worked with a partner to convert an old Nokia factory in the northern Vietnamese province of Bac Ninh to produce Pixel phones. Samsung developed a smartphone supply chain in the area a decade ago, giving Google an experienced workforce to pull from.
Sources claim that Google also plans to eventually move most production for hardware intended for the U.S. market out of China and into Vietnam, including the Google Home line of smart speakers. Right now, Google's smartphone business is relatively small and easy to move. Google is growing its smartphone business rapidly having grabbed the fifth-place ranking for Q2 2019 growing its marketshare despite a sales slump for the market overall.
Google shipped only 4.7 million smartphones in all of 2018 reports research firm IDC, but sales have grown significantly in 2019 as it already shipped 4.1 million units during the first half of 2019. Much of that sales growth is thanks to the affordable Pixel 3a smartphone that sells for as low as $399. Sources claiming to be familiar with Google's plans say that it will shift some production of the Pixel 3a smartphone from China to Vietnam before the end of the year.
Google isn't expected to vacate the Chinese market completely, as the market is massive and growing. Google rival Apple is currently evaluating how it can reduce its dependence on Chinese manufacturing; it currently makes 90% of its hardware in China.