Luxshare, German buyer distress, and the EU tariff gap: three forces reshaping the China vs Vietnam manufacturing decision in 2026.
For most electronics buyers sourcing volumes under $500k per year, China is still the right manufacturing base. Three developments in 2025–2026 have sharpened where the line falls: Luxshare's Vietnam expansion clarifies what kind of production actually moves there, the German Mittelstand crisis has changed who can afford to diversify, and the EU-Vietnam tariff structure creates a stronger incentive for European buyers than the US situation does.
What Luxshare's Vietnam move actually tells you
Luxshare Precision — the company that manufactures AirPods and Apple Watch — opened its Bac Giang facility in 2022 and began assembling AirPods Pro there in 2023, followed by Apple Watch Series 9. This is frequently cited as proof that high-quality electronics manufacturing is viable in Vietnam. It is, but the lesson for most buyers is the opposite of encouraging.
Luxshare is a $15B+ company with roughly 250,000 employees. Its Vietnam facilities are purpose-built for Apple's supply chain, capitalized with hundreds of millions in direct investment, and staffed with managers trained for years in Shenzhen. Apple moved not just the assembly, but a significant portion of the component supply chain — speaker drivers, acoustic mesh, battery cells — into the region alongside it. The facility is captive. It does not respond to RFQs from hardware startups.
The accessible Vietnam EMS ecosystem — factories that will take a custom electronics project from an independent Western buyer — remains thin outside the Samsung, Foxconn, Pegatron, and Luxshare axis. For PCB fabrication, the comparison is stark: China has an estimated 3,400+ PCB manufacturers; Vietnam has fewer than 30, almost none at internationally competitive quality for complex multilayer boards. Custom tooling and mold-making, which in Shenzhen is a half-hour drive from any factory, requires sourcing from China and shipping to Vietnam.
What Luxshare's success actually tells you: Vietnam can host world-class assembly for standardized, high-volume products when a Tier 1 EMS is willing to invest $200M+ in infrastructure. That is not the same as Vietnam being a credible alternative for custom electronics at $100k–$500k/year.
The German buyer distress factor
Germany is the largest European importer of electronics from China and historically the reference market for high-end industrial and consumer electronics sourcing. German insolvency filings rose approximately 22% in 2024 and hit a 20-year high by early 2025, driven by energy cost exposure, weak export demand, and the broader squeeze on industrial Mittelstand companies.
This matters to the China vs Vietnam calculation in two direct ways.
First, supply chain diversification projects require upfront capital. A credible Vietnam qualification — factory audit, NPI cycle, component validation, compliance re-testing — typically costs €50k–€200k over 12–18 months before the first production order ships. Companies managing insolvency risk or covenant stress do not execute these projects. A significant number of European buyers who had Vietnam on their roadmap in 2023–2024 have deferred or cancelled.
Second, distressed buyers prioritize unit price over supply chain security. If the alternative is shutting down, a 10–18% landed cost improvement that Vietnam might offer in 3 years is less interesting than a 5% negotiated improvement from an existing Chinese supplier this quarter. China's supply chain depth and negotiating flexibility — the ability to quickly switch factories, renegotiate terms, or change BOM — is a real advantage for buyers under financial pressure.
For financially stable European buyers, the calculus is different, and the EU trade structure changes the math.
The EU tariff gap: stronger than the US case
The US tariff situation for Vietnam — approximately 10% Section 122 versus 35–40% on Chinese-origin electronics — is real but uncertain. USTR opened new Section 301 investigations into Vietnam in March 2026, with an outcome expected in July 2026 that could add 7.5–25%. The transshipment enforcement risk is separate and severe: goods routed through Vietnam without genuine local value-add face a 40% penalty under HTS 9903.02.01.
The EU-Vietnam Free Trade Agreement (EVFTA, effective August 2020) creates a different structure. Most electronics categories exported from Vietnam to the EU face 0% import duties. Chinese-origin electronics currently face EU MFN rates of 0–3.7% on most electronics categories — a smaller differential than the US situation. But EU trade policy toward China is changing. The European Commission's investigation into Chinese EV subsidies resulted in provisional duties of up to 38.1%. Electronics have not been targeted yet, but the direction of travel — and the growing political pressure for reciprocity — means that Vietnamese-origin goods may offer better long-term tariff certainty for EU-bound products than Chinese-origin goods.
For UK buyers, the UK-Vietnam Free Trade Agreement (UKVFTA, effective January 2021) provides equivalent preferential terms. Vietnamese-origin electronics face 0% under UKVFTA. UK MFN rates on electronics are broadly similar to EU MFN, but UK trade policy toward China is increasingly independent from EU decisions.
The implication for European buyers: if you are building a supply chain for EU or UK customers and are concerned about the medium-term trajectory of EU-China trade relations, Vietnam's 0% EVFTA rate is a stronger, more durable tariff argument than the US Section 122 differential, which is explicitly temporary and under active review.
The cost gap is smaller than the headline numbers suggest
Setting aside tariffs, the underlying economics have not changed. Vietnam's manufacturing labor rate runs around $3 per hour. China's national average is roughly $6.50 per hour. That sounds like a 50% labor cost reduction, but labor is not most of what you are paying for in electronics manufacturing.
In a typical consumer electronics BOM, components are 50–70% of cost, PCBs are 10–20%, and direct labor is often 10–20%. If labor is 15% of your total cost and you cut it in half, you save 7–8% of total cost. The real effective advantage on finished electronics, once you account for the fact that Vietnam imported $136 billion in electronics components in 2025 — almost all from China — is 10–18%. That 10–18% is real money at scale. At $2M in annual orders it is $200–360k. The question is whether it clears the qualification cost and the supply chain complexity.
For NPI (new product introduction) specifically: working in Vietnam adds 4–8 weeks to your schedule compared to Shenzhen, because components travel from China first. In Shenzhen, Huaqiangbei contains over 40,000 businesses in 1.45 square kilometers; substitute components can be sourced same-day when a supplier cannot deliver. That infrastructure does not exist in Vietnam. For products still in development, the iteration drag compounds with every cycle. See the factory audit checklist for what to evaluate when qualifying a new facility.
When Vietnam makes sense: updated thresholds
Given the Luxshare data point, the German buyer distress factor, and the EU tariff structure, Vietnam manufacturing makes sense when most of these conditions apply together:
Annual order value above $500k, with stable financing. Below that level, the qualification cost rarely amortizes within a reasonable horizon. And if your company is managing financial stress, the project should not be on the roadmap at all.
Labor content above 30% of COGS. Cable harnesses, speaker assembly, box-build of pre-designed PCBAs — products where the $3/hr advantage translates to real unit economics rather than being diluted by component costs.
You are a European buyer prioritizing long-term tariff certainty. The EVFTA 0% rate is durable in a way that the US Section 122 differential is not. If you are building for the EU or UK market and have a view on the 5-year trajectory of EU-China trade relations, Vietnam's treaty-based access is worth weighting.
You are accessing a qualified Tier 1 EMS. The Foxconn, Pegatron, Luxshare, and a handful of other large contract manufacturers have Vietnam capacity with real infrastructure. Outside that ecosystem, independent EMS options for Western SMBs are thin, and the power reliability risk in Bac Ninh (the main electronics hub, which experienced $1.4B in damage from rotational blackouts in June 2025) remains a genuine operational concern through at least 2028.
The product is already designed, the BOM is stable, and you are adding assembly capacity, not executing NPI. New product development in Vietnam is significantly slower than in Shenzhen.
For most electronics buyers under $500k in annual orders with standard electronics products, China's supply chain depth, tooling access, and faster NPI cycles outweigh Vietnam's cost and tariff advantages. The consumer electronics industry page covers the specific sourcing dynamics in more detail. If you are a European buyer evaluating the tariff angle in detail, the EU electronics import guide covers the EVFTA framework alongside the current EU-China trade picture. A real case study of Bluetooth speaker production illustrates what the Shenzhen manufacturing ecosystem delivers in practice — including how factory proximity to component suppliers enabled same-day BOM adjustments during certification testing. If you want to run the landed cost numbers on your specific product, the sourcing service includes that analysis as part of the supplier identification process.
