Applying the Global Value Chain theory and the Institutional theory, through case studies of Intel, Apple, and Ford, this research examines how friendshoring has been applied in comparab
Evolution to Friendshoring 3 L210, Global uncertainties nh e
U.S Practices to Friendshoring Strategy 4
Canada and Mexico have recently surpassed China to become the largest trading partners of the United States, with Mexico now leading as the top importer This shift is a significant outcome of the friend-shoring policy and aligns with Donald Trump's initial trade strategy during his presidency, which sought to decrease U.S reliance on Chinese products due to both political motivations and Trump's view of China as a rival power.
Joe Biden has implemented trade restrictions with China to enhance US competitiveness and foster growth in the tech industry High tariff levels on Chinese exports have increased the costs of importing goods from China to the US.
Strengthening alliances can be achieved through new trade agreements, such as the US, Mexico, Canada Agreement (USMCA), which emphasizes geopolitics and friend-shoring rather than merely reducing tariff barriers, unlike its predecessor, the North America Free Trade Agreement (NAFTA) (Jackson & Shepotylo, 2024).
Since taking office on January 20, President Donald Trump has enacted or threatened hostile measures against several allied nations, including Panama, Colombia, Mexico, and Canada, despite existing agreements aimed at reducing tariffs and trade barriers.
Research gap 5
Geopolitical events significantly impact the global economy through various channels, including financial, trade, and commodity prices Increased restrictions stemming from international tensions can disrupt trade flows and create supply chain issues, even affecting third-party nations Global supply chain networks are essential for commerce, allowing businesses to transport goods across borders and reach consumers worldwide However, these complex systems are vulnerable to geopolitical tensions, which can lead to operational disruptions, higher costs, and substantial risks for businesses Political factors, ranging from trade wars and tariffs to regional conflicts, can have extensive repercussions on supply chains.
Previous research highlights the profound effects of geopolitical tensions on the global supply chain, particularly their detrimental impact on logistics (Charpin et al., 2024) These studies define economic geographical tensions, providing a framework to accurately assess their overall influence on the economy and global supply chains.
Current studies have not explored the trends of friendshoring or their implications for individual countries, which could offer valuable insights for governments to align with economic developments This paper will focus on the challenges and opportunities for Vietnam in fostering cooperation in this context.
This article explores five trends among American multinational corporations (MNCs) related to friendshoring, focusing on case studies of Intel in Malaysia, Apple's manufacturing shift to India, and Ford's relocation to Thailand It analyzes the motivations behind these strategic decisions within the context of friendshoring, offering valuable insights for Vietnamese authorities and policymakers to capitalize on this emerging global trend.
THEORETICAL FRAMEWORK 6 2.1 Global Value Chain (GVC) Theory: 6 PIN nne
Institutional Theory 8
Institutional theory explains how organizations are deeply embedded in larger social, legal, and cultural environments that shape their behavior, structure, and evolution Greenwood ef ai
Institutional theory, as defined by 2017, emphasizes the enduring aspects of social structure, suggesting that organizations are not just rational entities focused on efficiency but also strive for legitimacy by conforming to established norms and expectations in their environment (Meyer and Rowan, 1977) This perspective shifts the focus from technical efficiency to the importance of social conformity and legitimacy.
2.2.2.1 Institutional Environment and Organizational Behavior
Organizations operate within a complex institutional environment shaped by legal frameworks, cultural norms, professional standards, and societal expectations According to institutional theory, firms pursue legitimacy by adhering to these prevailing rules and norms, in addition to their technical goals like profit maximization Meeting societal expectations is essential for an organization's survival, reputation, and access to resources.
Isomorphism is a fundamental concept in institutional theory, describing how organizations within a field become more alike over time (DiMaggio and Powell, 1983) This process occurs through three mechanisms: coercive isomorphism, which involves pressures from laws and regulations; normative isomorphism, driven by professionalization and expert influence; and mimetic isomorphism, where organizations imitate successful practices during uncertain times These dynamics illustrate how organizations across various sectors tend to adapt similarly following significant regulatory or political changes Additionally, legitimacy serves as a strategic resource for organizations navigating these pressures.
Gaining and maintaining legitimacy is crucial for organizations, as defined by Suchman (1995) as the perception that an entity's actions are appropriate within a system of societal norms and values To align with these societal expectations, firms often engage in symbolic actions, such as public commitments to sustainability and ESG compliance, even if these actions do not yield immediate economic benefits.
Institutional theory highlights that organizations can separate formal structures from their actual practices, as noted by Meyer and Rowan (1977) This means that companies might implement formal policies, such as compliance programs and green certifications, primarily for symbolic legitimacy rather than to alter their core operations This approach allows firms to balance external pressures with their internal efficiency requirements.
Institutional pressures can limit actions, but they also provide opportunities for institutional entrepreneurship, where organizations or leaders actively shape and redefine institutions to benefit themselves For instance, large corporations often lobby to influence regulations or establish new industry standards that others subsequently adopt.
Institutional environments are diverse and characterized by the coexistence of various, often conflicting, institutional logics such as market, state, and professional logics Organizations adeptly navigate and hybridize these logics, integrating different norms and expectations to function effectively across various fields.
Institutional change is driven by mechanisms like external shocks, gradual layering, reinterpretation of rules, and the replacement of old norms These processes illustrate the evolution of fields over time and demonstrate how new regulatory frameworks can reshape organizational behavior.
RESEARCH RESULTS 10 3.1 Intel in Malaysia 10 LAN tr ne
Intel Corporation, founded on July 18, 1968, is a prominent American multinational technology company based in Santa Clara, California, specializing in semiconductor design and manufacturing The firm is at the forefront of advancements in artificial intelligence (AI), cloud computing, data centers, and edge devices, significantly influencing global digital infrastructure Committed to corporate responsibility, Intel prioritizes ethical practices in human rights, sustainability, and inclusion, fostering a culture of engagement that contributes to global development.
Since its inception, Intel has embraced globalization, establishing manufacturing operations in the United States and design facilities in 50 countries worldwide This strategy has enabled the company to achieve cost efficiencies, attract talent, and access markets, especially in regions like China, Malaysia, Israel, Poland, and Vietnam These locations were selected for their cost-effectiveness, availability of skilled labor, and favorable investment conditions.
Amid geopolitical uncertainties, especially between the U.S and China, Intel is implementing a friendshoring strategy by relocating and expanding its operations to geopolitically stable countries with a strong trade history The company is making significant multibillion-dollar investments in semiconductor fabrication plants in nations such as the United States, Germany, and Malaysia.
Malaysia, recognized as one of the "Asia Tigers," stands out as one of the most developed nations in Asia (Deenash, 2024) Its strategic location in Southeast Asia, along the Strait of Malacca, positions it as a key player in one of the world's busiest shipping lanes.
Malaysia boasts a stable governance environment characterized by trade openness and has been a long-term participant in significant trade agreements and frameworks, including the Regional Comprehensive Economic Partnership.
The Regional Comprehensive Economic Partnership (RCEP), the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), and the Indo-Pacific Economic Framework for Prosperity (IPEF) represent a strategic effort to strengthen supply chain resilience This initiative is particularly relevant for Western multinational corporations aiming to reduce their dependence on politically sensitive regions, such as China.
In 1972, Malaysia became Intel's first offshore site, marking the company's initial step towards global expansion This partnership has significantly contributed to Malaysia's evolution into a global high-tech manufacturing hub Initially, Intel invested $1.6 billion, but a pivotal moment occurred in 2021 when the company announced plans for a $7 billion operation in Penang This strategic investment underscores Intel's dedication to strengthening its global supply chain resilience through advanced manufacturing capabilities in Malaysia.
According to the Institution of Strategic & International Studies Malaysia, several factors made Malaysia a compelling destination for this strategic shift (Farlina, 2024):
The Global Value Chain theory indicates that multinational corporations (MNCs) like Intel should strategically choose investment locations based on their role in the global supply chain Malaysia, with its extensive experience in assembly, testing, and packaging, has developed a mature semiconductor system and is now the sixth-largest semiconductor exporter worldwide, accounting for 13% of global assembly, testing, and packaging Furthermore, Malaysia offers a highly skilled workforce with low labor costs and English proficiency, representing about 20% of the global talent pool for chip design, making it an ideal location for advanced manufacturing and research and development (R&D).
Institutional theory highlights the impact of external institutional forces, such as government regulations In Malaysia, the government has promoted semiconductor-related foreign direct investment (FDI) by providing customized fiscal incentives and institutional support, including tax exemptions for reinvestment, relocation, and exports, in accordance with the Promotion of Investment Act.
In 1986, companies engaged in research and development (R&D) can benefit from additional tax relief and incentives if they fulfill specific criteria One of the U.S government's objectives is to decrease reliance on China in the semiconductor industry due to political tensions Malaysia, known for its political stability and strong ties to the U.S., presents a safer and more dependable option for production By shifting operations to Malaysia, Intel can mitigate the risks of supply chain disruptions stemming from geopolitical conflicts.
Intel's manufacturing growth in Malaysia is a prime example of firm-level upgrading In 1972, the company invested $100 million to open its first assembly plant in the country By 1978, Intel had further developed its operations by establishing testing facilities.
In 1990, Intel shifted towards higher value-added activities by transitioning into product design and development The establishment of its first system manufacturing plant in Kulim in 1996 marked a significant evolution into a board design and assembly test facility By 2000, Intel integrated shared services, and in 2017, it introduced programmable solutions to Penang Since 2021, Intel's Malaysian operations have expanded to include advanced manufacturing, software development, R&D, and regional or global service hubs Overall, Intel's presence in Malaysia highlights the importance of firm-level upgrading and the vital role of institutional support and strategic collaboration in enhancing competitive participation in global value chains.
In 2021, Intel Corporation announced a significant $7 billion investment to establish an advanced semiconductor packaging facility in Penang, Malaysia, marking its largest investment in the country after over 50 years of operation This move underscores Intel's long-term commitment to enhancing supply chain resilience through geographic diversification and positions Malaysia as the largest global hub for Intel's advanced 3D chip packaging, reinforcing its role in the company's restructured global value chain (MIDA, 2023).
Intel is set to enhance its operations in Kulim, Kedah, aiming for a total investment of $14 billion in Malaysia by 2032 This initiative is driven by the need for operational efficiencies and is part of a larger friendshoring strategy designed to minimize risks from geopolitical disruptions and maintain a steady production of essential components.
In 2024, Intel initiated collaborations with local universities, including Multimedia University (MMU) and the University of Wollongong Malaysia (UOW), to create centers of excellence in integrated circuit (IC) design and artificial intelligence (AI) This initiative is designed to develop a skilled workforce tailored for the advanced semiconductor industry.
Intel’s friendshoring strategy in Malaysia has already produced tangible outcomes on both the corporate and national scales (Katarzyna, 2024)
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Apple in India 13
Apple Inc., founded in 1976 by Steve Jobs, Steve Wozniak, and Ronald Wayne, is a leading American multinational technology company based in Cupertino, California Originally recognized for its personal computers, Apple has transformed the tech industry with innovative products such as the iPhone, iPad, Mac, Apple Watch, and AirPods, along with advancements in computer software and mobile technology.
Apple drives technology trends and enhances user experiences across various sectors while fostering innovation in the industry By creating a marketplace ecosystem for third-party application developers, Apple leverages this new economy to broaden its product functionalities and solidify its market position (Steven and Karl, 2025).
To cut costs and enhance efficiency, Apple and other manufacturing companies have shifted production overseas The logistical challenges of final assembly in the United States have led to the manufacturing of many upstream components and subassemblies in China and Southeast Asia.
India is among the world's fastest growing economies, aiming for high middle income status by 2047, the centenary of its independence Despite global challenges, it continues to lead as the fastest growing major economy, with a remarkable growth rate of 8.2 percent in FY23/24, according to the World Bank (2024).
India has emerged as a significant player in global trade by establishing crucial agreements, including the India-ASEAN Free Trade Agreement (FTA) and the South Asian Free Trade Area (SAFTA) Additionally, it has recently signed the India-UAE Comprehensive Agreement, further enhancing its trade relations.
India is actively pursuing economic partnerships, such as the Comprehensive Economic Partnership Agreement (CEPA) and the India-Australia Economic Cooperation and Trade Agreement (ECTA), while opting out of the Regional Comprehensive Economic Partnership (RCEP) The country is also engaging in the Indo-Pacific Economic Framework for Prosperity (IPEF) to bolster supply chain resilience and attract Western investments Furthermore, India's involvement in the Quad initiative strengthens its trade and technology relationships with the US, Japan, and Australia, positioning it as a reliable alternative to China for global companies looking to diversify their supply chains.
3.2.1.3 Reasons why Apple has Shifted its manufacture from China to India
Supply chains are increasingly moving away from China, historically known as the world's manufacturing hub for the past 40 years, towards other cost-effective manufacturing centers in Asia The COVID-19 pandemic exacerbated existing disruptions, prompting companies to rethink their reliance on China, a trend that began during the trade war initiated by President Donald Trump in 2018 Tensions between the United States and China continue to persist under the Biden administration.
In 2022, US Treasury Secretary Janet Yellen emphasized a new trade strategy for Washington, advocating for a diversification of suppliers to reduce reliance on nations with geopolitical tensions This approach aims to secure components and raw materials from 'friendly' countries that share similar values, thereby enhancing the security of domestic production (Stefan Ellerbeck, 2023).
India is emerging as a strong competitor to China in low-cost, large-scale manufacturing, driven by its large, young population and expanding middle class, which presents opportunities for multinational companies to relocate operations Diversifying production away from China is essential for managing geopolitical and supply chain risks, as seen in Apple's strategy to enhance supply chain resilience The rapid growth of India's consumer market, coupled with government incentives like the PLI scheme, makes it an attractive destination for investment Furthermore, Apple's collaborations with local suppliers contribute to upgrading India's technological capabilities, aligning with the dynamics of global value chain management and fostering value chain restructuring.
Apple has been assembling smartphones in India through contract manufacturers since
2017 By 2020, Foxconn and Pegatron started producing higher-end models namely the iPhone
Until 2022, Apple primarily utilized India's manufacturing facilities for assembling entry-level and legacy handsets However, this shifted in 2021-2022 when Apple began assembling the iPhone 14 models in India In 2023, Apple further expanded its presence by opening its first retail stores in Mumbai and Delhi, while also increasing production to include the iPhone 15.
Apple's manufacturing suppliers in India are primarily located in Tamil Nadu, with key partners including Hon Hai Precision (Foxconn), Tata Electronics, and Flex Additionally, Karnataka hosts Wistron, Aequs, and Shenzhen YUTO Packaging Technology Other states such as Andhra Pradesh, Maharashtra, and Uttar Pradesh also contribute suppliers, including Cheng Uei Precision, Jabil, and Sunwoda, respectively This expansion highlights Apple's commitment to diversifying its supply chain in India.
Apple has effectively implemented friendshoring strategies by collaborating with major suppliers such as Foxconn, Pegatron, and Tata Group This approach has enabled the company to transition from assembling basic iPhone SE models to producing flagship iPhone 14 and 15 devices shortly after their global releases.
In a significant milestone for non-Chinese production bases, the company has expanded its Indian operations by launching flagship Apple Stores in 2023 and aims to manufacture 25% of the world's iPhones in India by 2025 This strategic move is bolstered by India's Production-Linked Incentive (PLI) scheme, which provides substantial subsidies to enhance local electronics manufacturing.
In the first half of fiscal year 2024-2025, Apple’s vendors project a freight-on-board production value of $9 billion By the end of FY25, India is anticipated to account for 17-18% of global iPhone production volume and 14% of its value, an increase from 12-14% in FY24 In FY24, India's production value of iPhones reached $14 billion, indicating a consistent growth in Apple's manufacturing presence in the country.
In 2025, Foxconn intends to produce 25-30 million Apple iPhones at its Indian facilities, which would be an over twofold increase from the previous year's output (TOI Business Desk,
2025) This demonstrates the effort of Apple to diversify its production network while expanding its manufacturing presence in India
Apple faces several challenges, particularly in labor productivity, which is crucial for evaluating economic growth and living standards The Reserve Bank of India reported that nine out of 27 industries saw a decline in labor productivity in FY23, with eight from the manufacturing sector Additionally, high turnover rates due to intense production demands and ongoing supply chain bottlenecks have led to delays in component sourcing These issues highlight India's competitiveness struggles compared to China.
The long-term success will depend on addressing productivity gaps, increasing skillful workforces and developing stronger local supplier ecosystems
Despite those hurdles mentioned, Apple's friendshoring strategy has significant impacts on India across multiple dimensions: