Apple's Tech Supply Chain Shows Difficulty of Dumping China
American companies have had a growing list of reasons to downgrade their ties with China in recent years. Former President Donald Trump's tariffs. Beijing's stringent Covid lockdowns. The US-Sino standoff over Taiwan. Political pressure to “friend-shore” supply chains toward nations aligned with Washington.
But breaking up, as the adage goes, is hard to do.
That conclusion is evident from a Bloomberg Intelligence analysis of Apple Inc., which is trying to reduce its dependence on China. The Cupertino, California-based company company already started producing some iPhone 14 models in India, in an earlier than usual move for new models. And Apple's largest supplier, Foxconn Technology Group, recently agreed to a $300 million expansion of its production facilities in Vietnam.
But Bloomberg Intelligence estimates it would take about eight years to move just 10% of Apple's production capacity out of China, where roughly 98% of the company's iPhones have been made. Scores of local component suppliers -- not to mention modern and efficient transport, communication and electricity supplies -- make it particularly difficult to get out of the world's second-largest economy.
“With China accounting for 70% of global smartphone manufacturing and leading Chinese vendors accounting for nearly half of global shipments, the region has a well-developed supply chain, which will be tough to replicate -- and one Apple could lose access to if it moves,” BI's report from analysts Steven Tseng and Woo Jin Ho said.
An Apple spokesperson did not respond to a request for comment.
It's one thing to look outside China for other makers of toys and t-shirts. But US technology firms invested more than two decades, and tens of billions of
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