It won't be easy for Apple to quit China

From Debby Wu's "Tech Reconsiders Dependence on China, But Costs to Move Are High" mailed Friday to Bloomberg Technology subscribers:

[P]laces like India, Mexico, Taiwan and Vietnam have all benefited from the shift away from China to varying degrees. For example, Apple Inc.’s three major iPhone assemblers—Foxconn Technology Group, Pegatron Corp. and Wistron Corp.—have set up operations in India...

Now, with many companies sustaining losses from Beijing regulation and facing unpredictable risks from China’s relentless pursuit of Covid Zero, there’s renewed energy in discussions about bulking up manufacturing capabilities elsewhere.

Chief Executive Officer Cheng Ping of Delta Electronics Inc., a key parts supplier to Apple and Tesla Inc., was unusually blunt earlier this week when commenting on the impact from widespread lockdowns in the eastern Chinese city of Suzhou, where his company operates factories.

Foxconn is also acquiring 40 acres of land in Chennai in order to make products for India’s domestic market, according to a person familiar with the matter, confirming a report in India’s Economic Times earlier this week.

But it will be difficult, if not impossible, for any other country to replace China in the global supply chain given the sheer scale of its manufacturing power. Take Foxconn’s iPhone City campus in central China, which currently employs some 200,000 workers according to a recent report in the official Henan Daily. A skilled labor pool of that size for a single employer would be hard to find anywhere else.

My take: Assembling iPhones mostly calls for small fingers and good hand-eye coordination. Surely China's not the only country where those can be found. Getting an entire ecosystem of parts suppliers to move to India is another matter.

11 Comments

  1. Greg Lippert said:
    Just cause it’s difficult or expensive doesn’t mean it isn’t prudent for self preservation.

    The Chinese government has not proven to be reliable to any needs but their own self interest and control.

    5
    April 22, 2022
  2. Jerry Doyle said:
    We have discussed this subject matter before. Apple isn’t quitting China. No way.

    I recollect the consensus of most everyone on this blog was that Apple would reduce little, if any, its continued manufacturing presence in China. This continuation in China may be true for most global companies.

    A finding from the Covid pandemic and from the effects of the Russia-Ukraine war of late is ever more the need for a comprehensive manufacturing ecosystem globally. Manufacturing and supplier source redundancies matters in the age of geo-political nation state economic trade integration.

    2
    April 22, 2022
    • Horace Dediu said:
      What you are describing is an exit strategy from China.

      0
      April 25, 2022
      • Jerry Doyle said:
        @Hoarace Dediu: “… What you are describing is an exit strategy from China.”

        Regardless of the redundancies in its supply chain established in other countries Apple remains in China as part of its global comprehensive ecosystem for manufacturing iPhones. So, Apple still remains in China. That was the issue presented.

        0
        April 25, 2022
  3. Jerry Doyle said:
    Another method for discerning where a company places its emphasis is examining its organizational chart. Apple retains a VP & Managing Director of Greater China. That speaks volumes! Does one see the position of VP & Managing Director for Greater Europe, or for Southeast Asia for that fact?

    Apple will continue its presence and its emphasis in China as it has in the past.

    2
    April 22, 2022
    • Horace Dediu said:
      Its presence will depend on China’s actions.

      0
      April 25, 2022
      • Jerry Doyle said:
        @Horace Dediu: “… Its presence will depend on China’s actions.”

        True of any nation state, but do you candidly see China booting Apple from China? TC has been brilliant in navigating geo-political tensions between the US & China under Obama, Trump and Biden. Additionally, TC under the auspices of Apple, has pumped billions into the Chinese economy and gifted as much in philanthropic efforts to make China greener.

        Yes, China can boot Apple out of the country but geo-political events would have to fundamentally deteriorate significantly such as war breaking out between Taiwan and China over a Chinese invasion where the US would be forced by treaty to intervene. Hopefully, that event doesn’t occur. I don’t see an astute Xi Jinping over reaching, which like Putin, he would be doing to move on Taiwan. Besides, China now has a multiplicity of domestic problems of its own and Xi Jinping is attempting to remain in power.

        0
        April 25, 2022
  4. Kirk DeBernardi said:
    As it won’t be easy for China to quit Apple.

    Hasn’t it been a long-standing “complaint” that thousands have fled the rural poor areas of China, leaving their families behind, only to “suffer” a “slave” job at the mega production facilities, all the while providing support for their families back home.

    An inherent “China-problem” solver.

    China probably won’t “fix” what ain’t broke.

    (Reminds me of the classic song from the musical “1776”, “Molasses to Rum to Slaves”.

    2
    April 23, 2022
  5. Google just committed millions to a new product development center in Nairobi, Kenya. They already have an AI research center in Accra, Ghana. Chinese hegemony in South Asia lends support to building out elsewhere. China is investing everywhere but Africa is a huge continent with rapidly growing nations.
    It doesn’t need to be a fully-functional iPhone factory to begin. Build a parts supplier network, after creating technical education centers.
    I’m working with an old partner to add a technical college to the K-12 we already support in Ho, Ghana. Admittedly we are focusing on plumbing, electrical and carpentry to begin, construction trades, but they’ll be needed to build a parts plant.

    2
    April 23, 2022

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