Apple Inc’s suppliers are in talks to produce Apple Watch and MacBook in Vietnam for the first time.

Apple’s Chinese suppliers Luxshare Precision Industry and iPhone assembler Foxconn have started test production of the Apple Watch and MacBook in Northern Vietnam, according to a Reuters report.

Apple has been shifting some areas of iPhone production from China to other markets, including India, where it started manufacturing iPhone 13 this year, and is also planning to assemble iPad tablets.

India, the world’s second-biggest smartphone market, along with countries such as Mexico and Vietnam, is becoming increasingly important to contract manufacturers supplying American brands, as they try to diversify production away from China.

Last week, Taiwanese contract manufacturer Foxconn gave a cautious outlook for the current quarter after posting results that exceeded expectations, citing slowing smartphone demand after a pandemic-fuelled boom.

Like other global manufacturers, Foxconn – formally called Hon Hai Precision Industry Co Ltd – has dealt with a severe shortage of chips that hurt production, as bottlenecks from the pandemic lingered and the Ukraine war further strained logistical channels.