798 'china' storiesSeptember 2010 - March 2024
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China has been fundamental to Apple’s historical success, but is also arguably the greatest risk to the company’s future.
Table of contents
- Why are most Apple products made in China?
- What are the risk factors with China?
- What is Apple doing about it?
Why are most Apple products made in China?
Although everyone assumes Apple products are made in China because labor is cheap there, that’s only part of the story – and an increasingly small part, as the company’s assembly partners move toward more and more automated operations.
Steve Jobs originally transferred most Apple manufacturing to China because it was the only country in the world with a huge ready-made supply-chain network, and the ability to scale up production almost overnight. There are three main reasons China – and specifically the Shenzhen area – is such a powerful manufacturing center.
First, the city is strategically placed, serving as the gateway between mainland China and Hong Kong.It is one of the largest shipping centers in the world, with a massive container port.
Second, the Chinese government established Shenzhen as the first Special Economic Zone (SEZ) in the country. SEZs aredesigned to encourage enterprise through relaxed planning regulations and generous tax incentives – and crucially, to facilitate foreign investment in local companies. It is this, as much as its geographical advantages, which has enabled it to grow at such a pace.
Third, that SEZ was established way back in 1980, meaning that the city has had over 40 years to grow into the manufacturing center of the tech world. Apple relies on a huge network of suppliers and sub-contractors, some of which may make just a single tiny component. The majority of them are based inShenzhen and its immediate surrounds, so the logistics of bringing everything together in one place for assembly are straightforward.
What are the risk factors with China?
Being over-dependent on China carries a number of risks.
First, there is the generic one: Being overly dependent on any one country is a strategic risk. For example, the COVID-19 pandemic originated there, and had a massive impact on manufacturing capacity. Anything from a natural disaster to political upheaval could disrupt operations within a single country, so it is always wise to have a diverse range of manufacturing centers around the world.
Second, the relationship between the US and China has often been fraught. The trade war started by the previous US administration was a particularly low point, but continued tensions mean that there is always a risk of disruptions to trade between the two countries.
Third, it is increasingly damaging to Apple’s reputation to be so closely associated with a country that has a worsening human rights record – especially when the iPhone maker has no choice but to comply with local laws, however much they may conflict with the company’s own values. Apple has been required to remove VPN and a variety of other apps from the Chinese App Store, allow the iCloud data of Chinese customers to be stored on government-controlled servers, and more. Additionally, there have been growing reports of forced labor in China, including within many different areas of Apple’s supply chain.
What is Apple doing about it?
Apple has been working for a long time on diversifying its manufacturing operations, and has in recent years accelerated the pace at which it is doing so.
As explained above, this is far from an easy undertaking, but Apple now has major manufacturing operations in India, Thailand, Malaysia, and the Philippines, among other countries.
In India in particular, we are seeing the very early stages of a complete supply-chain infrastructure as the government uses a mix of carrot and stick to encourage companies to manufacture more of their components within the country – namely, tariffs on imports of components and tax breaks for local production. COVID-19 lockdowns in China also saw Apple move some iPad production to Vietnam for the first time, but it’s clear that the risks of over-dependence on China have never been greater.
FAQs
A new report says that one in seven iPhones are now made in India – pointing to a significant acceleration in Apple's work to reduce its dependence on China. Apple's reliance on China as its key manufacturing hub has been placing the company in an increasingly vulnerable position …
Why Apple is struggling in China? ›
Now the company's grip on China could be dislodged by a series of factors: a slowdown in consumer spending, growing pressure from Beijing for people to shun devices made by U.S. companies and the resurgence of national champion Huawei.
Why Apple is shifting from China? ›
The decision to shift away from China aligns with Apple's broader strategy, famously known as the China Plus One policy, aimed at diversifying its manufacturing footprint and enhancing local value addition from its suppliers.
What is Apple's involvement in China? ›
Apple logged some $73 billion in revenue in the region it calls Greater China—which includes its operations in Taiwan and Hong Kong—in 2023, up from $32 billion in 2014. Business slowed in China in 2023 but not as fast as it did elsewhere.
Is Apple trying to get out of China? ›
For the longest time, iPhones have always been produced in China. But over the past couple of years. The U.S.-China trade war is effectively meant that Apple has been increasingly pushing its suppliers to shift its supply chain outside of China.
Is Apple too dependent on China? ›
Apple depends quite heavily on China, for both sales and manufacturing.
Who is Apple's competitor in China? ›
Yet Apple also faces a more crowded Chinese market. One major competitor is Huawei. The Chinese tech giant's phone sales rose 64% in the first six weeks of 2024, according to Counterpoint. Huawei returned to the premium smartphone market last year with the Mate 60 Pro, a 5G smartphone featuring a homegrown processor.
How does the US rely on China? ›
In 2021, U.S. imports of $50.3 billion of Textile Products from China constituted 32.6% of the total U.S. imports of Textile products. Additionally, in 2021, China remained the major source of U.S. imports of Furniture, Bedding, Lamps, Toys, Games, Sports Equipment, Paint, and other Miscellaneous Manufactured Items.
How long will it take Apple to move production out of China? ›
Still, analysts told CNBC the iPhone-maker's dependency on China will remain for years to come. There's potential for India to “become the next China” for Apple production, but it could take as long as a decade before it happens, said Martin Yang, senior analyst of emerging technologies at Oppenheimer & Co.
What companies are moving production out of China? ›
Intel, Microsoft, Nike, and Dell have all recently signaled their intention to move some of their manufacturing out of China to different shores.
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Why did Foxconn leave China? ›
A key goal is to diversify global supply chains for emerging and critical technologies, reducing the world's dependence on factories in China. The Foxconn venture intended to leverage India's strengths in chip design and research and boost its production capacity.
Why does Apple choose to manufacture iPhones in China instead of the US? ›
It's not about the cost aspect - admittedly, the indicia are that it probably costs about $8 to $10 in labor per phone. It's about the plant, and the skilled labor. The US no longer has any of the necessary manufacturing plant for volume microelectronics assembly or test, and doesn't have the workforce to back it.
Does Walmart source from China? ›
95 Percent vs.
Walmart China “firmly believes” in local sourcing with over 95 percent of their merchandise coming from local sources. In America, estimates say that Chinese suppliers make up 70-80 percent of Walmart's merchandise, leaving less than 20 percent for American-made products.
How many US companies are leaving China? ›
Tokyo | Almost one-fifth of US businesses in China are looking to move some of their operations out of the country as confidence about their prospects in the world's second-largest economy hits a record low, a key survey shows.
Is Nike moving out of China? ›
Global apparel and footwear makers like Adidas to Nike have been shifting some of their supply chains out of China for the past decade. The moves, initially driven by lower operating costs, have lately been pushed by mounting geopolitical tensions between China and the west.
Why is Apple shifting from China to India? ›
Apple plans to shift a significant portion of its supply chain from China to India, aiming to boost local employment by three-fold to around 500,000 in the next three years. The tech giant is focusing on increasing the value addition from its Indian suppliers, following a similar strategy implemented in China.
Why did Apple shift from China to India? ›
Why is Apple shifting some of its manufacturing from China to India? The main reason for this shift is that Apple wants to reduce its dependency on a single country to avoid any supply chain disruptions. Additionally, China wants to make use of the growing market of India.
Why is Apple shifting manufacturing to India? ›
Bloomberg News is reporting exclusively that Apple now makes about 1 in 7 of its marquee devices from India. The ramp-up suggests an acceleration of efforts to reduce its longstanding reliance on China as geopolitical tensions mount.
Why doesn t Apple leave China? ›
Apple CEO Tim Cook stresses a "symbiotic" relationship with China, and even the Chinese government reaffirmed its willingness to provide a good environment and services to Apple. It was 1993 when Apple first established its presence in China with a Beijing office.
