Reuters says Apple can’t get rid of China’s dependence on supply chain “unplaceable”

Beijing time on August 29 morning news, Apple’s supply chain data shows that the establishment of plants in Brazil and India did not reduce the company’s dependence on China.

Few US companies are connected to China as closely as Apple. The foundries of Foxconn, Heshuo, Wistron and other companies employ hundreds of thousands of workers to assemble Apple equipment.

In recent years, Apple’s foundry companies have expanded to other countries. For example, India did not have an Apple foundry in 2015, but by 2019 it had expanded to three assembly plants, including a Foxconn factory, which plans to produce an iPhone X-series.

Apple’s use of the Indian factory to produce mobile phones is designed to circumvent high tariffs, and the company has taken similar steps in Brazil.

But factories outside China are smaller, and India and Brazil are currently only responsible for meeting Apple’s needs in these two countries. According to Apple’s data, the company’s foundry in China has increased far more than the outside, only Foxconn has expanded from 19 in 2015 to 29 in 2019, and Heshuo has increased from 8 to 12. . These new plants are at a time when Apple has added watches, smart speakers and wireless headphones to its lineup.

In addition to contract factories, other Apple suppliers, including those that sell components such as chips, glass, aluminum casings, cables, and circuit boards, are also more concentrated in China. The data shows that in all suppliers, 44.9% were located in China in 2015, and this proportion rose to 47.6% in 2019.

Reuters analyzed Apple’s five-year supply chain data. According to Apple’s spending, between 2015 and 2019, the data covers more than 750 foundry locations each year, belonging to Apple’s top 200 suppliers. Apple’s top 200 suppliers are likely to change, with the company’s total number of suppliers reaching thousands.

Reuters classified the data and calculated the overall situation of Apple’s supply chain in China. Every year, some Apples do not provide a specific address, and Reuters excludes these situations.

Apple declined to comment on Reuters analysis. The company’s CEO, Tim Cook, told investors in July that he wouldn’t put too much effort into responding to speculation that the company would shift production.

“Most of our products are produced everywhere.” Cook said on the conference call “There are many in the United States, and there are many in Japan, Korea, and China. The EU also provides a lot… I think the same is true in the future.”

China is irreplaceable

Apple faces obstacles in its reliance on China. There are clusters of suppliers that help it produce hundreds of millions of devices a year, but only need to keep inventory for a few days. This is crucial for the free cash flow that Apple investors value.

Other handset manufacturers have fewer shipments and higher flexibility. The Nikkei News reported on Wednesday that Google is shifting its Pixel smartphone production from China to Vietnam because it has established a cheap supply chain in Southeast Asia.

But Apple does not support this move because few other countries have the same labor force as China. Factories need skilled engineers to design and troubleshoot a wide range of tools and processes. Vietnam has been responsible for producing accessories for Apple for many years, and its population is less than one-tenth of that of China.

Even though Apple can produce equipment in India or Vietnam, production is still dwarfed by Apple’s overall demand.

Dave Evans, CEO of Fictiv, a San Francisco-based supply chain company, said that apart from China, “there are few places in the world that have the infrastructure to produce 600,000 mobile phones a day.”

So far, Apple’s main products have been exempted from tariffs, and many of its wireless devices have been deferred for eligibility last year. Cook also established close ties with US President Trump at the White House dinner and private meetings.

Apple told trade officials that they believe that tariffs as a whole will lead to higher consumer prices in the US, but have yet to say whether they plan to pass tariffs on customers by raising prices.

George R. Tuttle III, a customs attorney who works with electronics companies, says that for electronics, the manufacturing of the board can sometimes determine the country of origin of the product.

As a result, equipment manufacturers can manufacture circuit boards or other critical components outside of China, but still assemble equipment there to avoid tariffs.

Apple did not disclose such a plan. However, two industry sources said that Foxconn’s Indian subsidiary, in addition to serving Apple, also cooperated with HMD Global’s Nokia brand and Xiaomi, and now has the ability to produce circuit boards in India.

Post time: Aug-30-2019