Apple’s Chinese supply chain grew, despite President Trump’s trade war

From Nikkei Asia’s “China ousts Taiwan as Apple’s biggest source of suppliers” posted Wednesday:

China now boasts more Apple suppliers than any other country, a sign that Washington’s attempt to untangle U.S. and Chinese supply chains has had little impact on the world’s most valuable tech company.

Of Apple’s top 200 suppliers in 2020, 51 were based in China, including Hong Kong, according to a Nikkei Asia analysis of the Apple Supplier List released last week, up from 42 in 2018 and knocking Taiwan out of the top spot for the first time ever. Apple did not release data for 2019.

Chinese suppliers have also helped Apple build production capacity in other Asian countries as part of the company’s strategy to diversify its supply chain…

“Most Chinese suppliers have very similar approaches,” one Apple supply chain manager told Nikkei Asia. The Chinese suppliers win orders by offering very low prices to Apple that non-China suppliers find hard to imagine, the manager said. “They are willing to take low-margin businesses that other suppliers are reluctant to pick up. This way, they could gradually level up by working with Apple and can later bid for more business the next time.”

My take: Paging Prof. Christensen

9 Comments

  1. Daniel Epstein said:
    Well one could and should question former president Trump’s policies effectiveness in this case but let’s put that aside for the moment. This report seems to be measuring the equivalence of market share for Apple suppliers by quantity but not by revenue. And then they draw a conclusion which may or may not reflect Apple’s reliance on China going forward. How do you calculate a China supplier setting up facilities in a different country for Apple? Taiwan semi setting up a production plant in Texas? So far Apple seems to be adjusting the supply chain to its own benefit and that likely means multiple ways to produce goods with lessened geo political risks with economic solutions in mind.

    7
    June 2, 2021
  2. Jerry Doyle said:
    Interesting to view the PRC’s flag flying alongside the Apple  at the Apple Store in Shanghai. And this comes after China demanded Apple remove from the back of iPhones sold in China the words: “Designed by Apple in California Assembled in China.” China may soon be promoting Apple as a China company based on its propensity to steal IP.

    0
    June 2, 2021
  3. The Chinese government is clearly focused on policies that make it advantageous to keep supplies in-country. Many Chinese firms supplying Apple sell to competitors, invest heavily in R&D themselves, have long-established partnerships and new locations in other nations. The Chinese government clearly supports the use of their enhanced transportation network with the Road and Belt Initiative (RBI). The control of rare earth (minerals, not the rock band from Detroit) plays no small part in this carefully orchestrated plan.
    I prefer to study international business development almost entirely using geodata and satellite imagery. The addresses of all major businesses, including Apple suppliers, are publicly available. When you take a gander at the intricate network of Apple suppliers around a Hon Hai or Pegatron plant, using Google Earth, you learn far more than any Nikkei report. Geodata is also publicly available, so I can see sufficient power, water, roads and other infrastructure are already in place to support greater expansion. Vietnam, Philippines, Pakistan, India and Indonesia are catching up. Malaysia and Singapore exceed China in necessary infrastructure but lack the land. 6-lane road, airport and harbor RBI components reach all these nations or very soon will. You can see it all now in the satellite images.

    5
    June 2, 2021
    • Gregg Thurman said:
      I wonder how much proximity to Hon Hai, Pegatron et al assembly facilities play in Apple’s supplier decisions.

      What you’re seeing in those images (infrastructure) are the culmination of 40 years of forward thinking by the PRC.

      It’s simply amazing that in the US we have politicians fighting over the pork, vs devising a long range plan to do just as the Chinese have done. It’s no wonder US manufacturing has fled offshore as it has. Lower wages are a factor. So to is a work force educated in the sciences, and regulations that improve manufacturing, not deter it.

      We may figure it out before Chinese becomes mandatory in K-12 education. I have my doubts as long as religious litmus tests determine who is elected.

      1
      June 2, 2021
    • David Emery said:
      Which analyst tried to predict Apple quarterly results by analyzing the parking lots around Apple suppliers?

      0
      June 2, 2021
  4. Bart Yee said:
    @Gregg
    Yep, industrial resource planning only effectively happened with oil, coal & power plants / users, automotive companies, steel mills, and some electronics makers, plus aerospace to some extent. All predicated on physical movement facilitated by railroads, harbors, airports, and eventually trucking transports. Because of the US’s sprawling and individual nature, IMO, we’ve succeeded in spite of ourselves, and of course, have gone through multiple iterations of openings, modifications, closings, abandonment, and wholesale uprooting and movement of companies and their employees.

    As the nature of US industry has shifted from heavy industry to more tech, logistics still plays a role but much more is transacted on the internet rather than physical highways. Still, critical infrastructure is dependent on current old, in some cases outdated and vulnerable systems laid down 50-110 years ago and costs to update/maintain are astronomical or prohibitive.

    0
    June 2, 2021

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