Apple would have announced to its service providers, in charge of manufacturing the products, that it wanted to intensify production outside of China, reported the Wall Street Journal May 21. Currently, the Middle Kingdom accounts for 90% of iPhone, iPad and MacBook production. The firm at the apple is interested in countries like India and Vietnam to no longer depend on China and its authoritarian policy.
India, the new paradise of the iPhone?
China’s extremely restrictive health policy has been a huge burden for the tech industry. With the resurgence of the virus last April and the implementation of new confinements, such as in Shanghai, Apple forecasts a decrease in sales of between 4 and 8 billion dollars for the current quarter. Since 2020, Apple has dreamed of new horizons, but its ambitions had been hampered by the start of the covid crisis.
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India and Vietnam are among the territories that most interest Cupertino. These two countries already host a share of Apple’s production, but in tiny dimensions. iPhone makers Foxconn and Wistron have already placed factories in India, for the local market where iPhone sales are growing rapidly. Apple had unveiled in April the start of production of the iPhone 13 on the Sub-Continent.
Tim Cook’s company has reportedly entered into discussions with its service providers to expand to India where they will produce devices for export. In 2021, India manufactured 3.1% of iPhones in the world. This should represent between 6 to 7% in 2022. Almost all the rest of the production is based in China.
According to some analysts mentioned by the Wall Street Journal, Apple can hardly part with China. The workforce is very well trained, production costs are extremely low and, above all, there is a well-established network of suppliers that will be difficult to recreate in another country. In addition, the conflicting relations between New Delhi and Beijing can also be a brake on the expansion of the production of service providers.
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Vietnam is also an interesting alternative. The country, which borders China, is already a major manufacturing hub for Samsung smartphones. There is expertise in this sector that Apple could benefit from. Its provider, Luxshare, already manufactures the AirPods in the country. Apple wants manufacturers to go outside of China to do the preliminary work essential to mass-producing a new device.
By leaving China, Apple will not only strengthen its own independence. The firm could be the first gear that will trigger a movement on the part of other companies. Beijing has lost the trust of some Western corporations by preventing any form of criticism of Russia for the invasion of Ukraine.
As the largest US company by capitalization, Apple is in the best position to effectively negotiate its supply chain transition into new territories. Apple’s departure could have major economic consequences for China. Foxconn currently employs 200,000 workers to manufacture the iPhone 13. In 2016, the tech giant injected $275 billion into the Chinese economy.