Apple still bets on China despite the unstable supply chain context

 Many sources say that Apple is strengthening its cooperation with China even as it continues to expand production activities in Southeast Asia and India. The results clearly show the US technology giant's desire to balance politics and business, according to KrAsia.

Apple decided to expand more suppliers based in China and some production locations in 2023. Meanwhile, the company tends to rarely use suppliers from Taiwan, the United States, and Japan. More Japanese and Korean, citing Nikkei Asia's analysis of Apple's latest official supplier list.

Nearly every year, Apple releases a list of official suppliers for all products. The latest announcement includes 187 companies, accounting for 98% of its business in fiscal 2023.

Chinese suppliers have formed Apple's largest supplier group since 2020, growing to 52 last year from 48 in 2022. Number of manufacturing or development facilities in China, including both domestic and foreign company-owned facilities, increased from 10 to 286 facilities.

According to Apple data analyzed by Nikkei Asia last year, about 84% of Apple's top 187 suppliers are based in China.

The deep relationship with China comes as Apple accelerates the process of shifting its supply chain to Southeast Asia amid the fierce US-China technology war.

In 2023, the number of Apple suppliers operating in Vietnam increases by 40% to 35 facilities, while the number in Thailand increases by about a third to 24 facilities. The number of suppliers in India remained at 14, with local conglomerate Tata Group entering the list of top suppliers for the first time. Tata Group supplies iPhone cases and its presence in the supply chain is expected to increase as the company decides to acquire an iPhone assembly plant in Bangalore, India.

BALANCE OF GEOPOLITICAL TENSIONS

However, Apple's growing expansion strategy in India and Southeast Asia does not mean limiting its operations in China.

According to analysts, about 37% of the 35 suppliers in Vietnam come from China and Hong Kong, including AirPods assembler Luxshare and Goertek, iPad assembler BYD. All three are actively improving production capacity in Vietnam to serve Apple.

Last year, several Chinese suppliers made Apple's top supplier list for the first time, including San'an Optoelectronics, which makes LED lights and gallium nitride; Baoji Titanium Industry, a titanium and nickel supplier based in Shaanxi; finally Jiuquan Iron & Steel, the state-owned metals company headquartered in Gansu.

Taiwan and China suppliers still maintain the second largest position in the Apple supply chain, followed by the United States, Japan and Korea.

Apple's strategy is in sharp contrast to the strategy of some US companies such as Dell, which aims to ban the use of all Chinese-made chips and components.

Perhaps more than any other US company, Apple is still operating closely between Washington and Beijing. Not only does it account for a significant portion of the supply chain in the 'country of billions', Apple's revenue from mainland China - the world's largest consumer electronics market, accounted for 17% of the company's total revenue in the December quarter. .

PROMOTING INVESTMENT IN ASIA PACIFIC

Recently, Apple CEO Tim Cook became an ambassador for many of the US technology giant's activities in Asia Pacific.

In March, he embarked on a weeklong visit to China during which he met not only with CEOs from several key suppliers such as iPad assembler BYD and glass materials maker Lens Technology; but also dialogue with many high-ranking Chinese officials.

Not only that, he also held the opening ceremony of his first store in Shanghai and announced that he would expand the R&D center here. Apple CEO emphasized China's role in the company's success, "no supply chain in the world is more important to us than China," China Daily reported.

Apple has faced increasing geopolitical challenges in China. Last year, Chinese Foreign Ministry spokesman Mao Ning, said the iPhone had security concerns, although he did not publicly confirm that China's central agency and government blocked use of the device.

Huawei, Apple's top rival in the high-end phone segment, last week introduced its latest Pura 70 series, after the surprise release of the Mate 60 Pro series in the second half of 2023. Huawei's return will put pressure on most competitors in the high-end phone segment in China. Huawei shipments in its home market in the first quarter of 2024 increased 69.7% from a year earlier, while Apple fell 19.1%, according to Counterpoint data.

Globally, Apple shipments in the first quarter of 2024 decreased by nearly 10%, a quite sharp decrease compared to the same period last year. A few weeks after his visit to China, CEO Tim Cook continued his trip through Southeast Asia, meeting with Vietnamese Prime Minister Pham Minh Chinh, Indonesian President Joko Widodo and Deputy Prime Minister and Prime Minister of Singapore Lawrence Wong.

Apple affirmed that it will increase spending on many suppliers in Vietnam, consider manufacturing in Indonesia and invest more than 250 million USD in its Singapore campus to "provide space for development as well as a number of functions." other ability".

THE MOST COMPLETE SUPPLY CHAIN ​​IN THE WORLD

Ms. Karen Ma Li-Yen, Director of IEK Consulting, said Apple can continue to work with Chinese suppliers because they hope to achieve geopolitical balance, bringing cost efficiency.

"They have some considerations," said Alibaba Chairman Jack Ma. "They must continue to work with suppliers based in China, because Huawei is coming back strong. If Apple hopes to continue growing in the Chinese market, it must share the benefits with some suppliers. However, not every decision has to do with geopolitics. Many Chinese suppliers can provide quality products at affordable costs ".

Jack Ma is also an expert in Southeast Asia. He said Apple suppliers are unlikely to abandon production in China, but will increase production in some other countries. "Vietnam and Thailand are currently the most popular destinations for technology companies and suppliers," Jack Ma shared. "However, Vietnam has recently had a large number of companies move in, leading to electricity and labor constraints. This makes Thailand an increasingly attractive alternative."

Meanwhile, India is the most populous country in the world and a large market for electronics manufacturers, but investment has not been focused. Regarding foreign investment, Alibaba Chairman said that only domestic equipment assemblers are increasing production, while many electronic component and module manufacturers are still waiting for consideration.

"Overall, China has the world's most complete supply chain for laptops and smartphones," said IDC technology analyst Annabelle Hsu. "China remains the hub for component suppliers." . Production diversification is a global trend, but supply chain transformation is a complex process that takes time."

David Pac

Update 09 May 2024