Apple Is Slowly Reducing How Much It Depends on Chinese Manufacturers
The mushrooming of factories in southern India marks a new chapter for the world’s biggest technology company. Apple’s extraordinarily successful past two decades — revenue up 70-fold, share price up 600-fold, a market value of $2.4trn — is partly the result of a big bet on China. Apple banked on China-based factories, which now churn out more than 90% of its products, and wooed Chinese consumers, who in some years contributed up to a quarter of Apple’s revenue. Yet economic and geopolitical shifts are forcing the company to begin a hurried decoupling. Its turn away from China marks a big shift for Apple, and is emblematic of an even bigger one for the world economy.
The question is whether moving production physically out of China will be enough to avoid future crackdowns. Even as Apple makes more of its gadgets outside China, it is no less reliant on Chinese-owned companies to build them. Chinese manufacturers such as Luxshare, Goertek and Wingtech are taking an increasing share of Apple’s business beyond China’s borders.
It takes a long time to turn the big ship Apple. A year ago, China surpassed Taiwan as the location of most of Apple’s suppliers. But, as I wrote at the time, counting which suppliers are located where is not necessarily the best metric for whether the company’s dependence on China is deepening or receding. The Economist’s summary indicates device manufacturing is increasingly taking place outside China. If you are not super into human rights abuses, it is a good sign that Apple is diversifying. But, as I also noted last year, many of the suppliers with ties to forced Uyghur Muslim labour are deeper in the supply chain. They produce things like power supplies and internal cables. What does the future of sourcing those components look like for a company like Apple, with its unique scale and needs?