How Apple is reducing its reliance on its Chinese supply chain
From Made in China to Made in India: How Apple is reducing its reliance on its Chinese supply chain. Source: AFP
- Apple buyers are facing longer wait times for the company’s flagship MacBook Pro laptops, mainly due to the lockdown in China.
- The delays reflect Apple’s struggles to keep its Chinese supply chain running smoothly amid another Covid outbreak.
- At this point, the US giant’s second-largest Chinese assembly plant has suspended production at key plants in Shanghai and nearby Kunshan.
- Apple has also started manufacturing the iPhone 13 in India as it expands production capabilities outside of China.
Apple Inc’s reliance on China has long been a recurring concern. From the beginning of the trade wars between Washington and Beijing, to when Apple’s suppliers in China were affiliated with the forced labor program and the most severe supply constraints to date, related to Covid-19. All of this has highlighted the urgency for Apple to reconsider its production base towards its next best option, India.
When Apple first entered the vibrant Indian manufacturing space in 2015, the company had aggressively increased its market share while increasing its manufacturing capabilities in the country. Gradually, more and more Apple products were assembled in India and under the “Make in India” initiative. In short, the American tech giant is gradually developing its manufacturing capabilities outside its traditional China base.
It’s not just India alone — in fact, even Mexico and Vietnam are becoming increasingly important to supplying contract manufacturers as Apple tries to diversify production away from China. The latest update, according to Reutersis that Apple started manufacturing iPhone 13 in India, the world’s second largest smartphone market.
According to Reuters’ sources, the phone is produced in a local factory in Apple’s Taiwanese supplier Foxconn, located in the city of Sriperumbudur in the southern state of Tamil Nadu. For context, the iPhone 13 is the fourth model to be produced locally after Apple launched manufacturing operations in India. in 2017 with the iPhone SE, rather than simply managing its assembly line.
Foxconn, the maker of Apple iPhones has already announcement plans to create 10-12 facilities in India, which would include factories and data centers. Although Foxconn has long based most of its operations in China, rising labor costs and deepening US-China tensions prompted him to look elsewhere. Considering this, India has cleverly taken the risk by tempting major smartphone manufacturers with attractive subsidies.
Currently, all iPhones are made by three Taiwanese companies: Foxconn, Pegatron, and Wistron. At this point, even Pegatron has halted operations at two subsidiaries in the Chinese cities of Shanghai and Kunshan, as global supply chains feel the pinch from Beijing’s strict zero-Covid measures.
That said, the Pegatron suspensions mark the latest blow to Apple, which has seen disruptions to other vendors’ assembly lines in recent months as Chinese cities struggle to curb virus outbreaks. Foxconn even halted operations in the Shenzhen tech hub in March itself. A final report from Bloomberg also reported that Apple’s latest high-end models are now seeing delivery estimates pushed back to June as supply chain issues escalate again.
As a reminder, in August 2020, Foxconn and Pegatron were among the companies considering new factories in Mexico to dilute business risks. Meanwhile, Pegatron was considering a US$1 billion investment in production sites in Vietnam.
At this point, despite many efforts by Apple and its partners to diversify their supply chains, China remains a major manufacturing hub. The tech giant, which is due to report its second-quarter results on April 28, should give investors a window into its supply issues.