It will come as no surprise…

From Yang Jie’s “Apple Looks to Boost Production Outside China” posted Saturday by the Wall Street Journal:

TOKYO: Apple has told some of its contract manufacturers that it wants to boost production outside China, citing Beijing’s strict anti-Covid policy among other reasons, people involved in the discussions said.

India and Vietnam, already sites for a small portion of Apple’s global production, are among the countries getting a closer look from the company as alternatives to China, the people said.

More than 90% of Apple products such as iPhones, iPads and MacBook laptops are manufactured in China by outside contractors, according to analysts. Apple’s heavy dependence on the country is a potential risk because of Beijing’s authoritarian Communist government and its clashes with the U.S., analysts have said.

My take: Which contract manufactures has Apple been talking to? The Tokyo dateline could be a clue.

13 Comments

  1. David Emery said:
    Well, I suspect there are not that many centers of -manufacturing management experience-. China, Taiwan, Japan, maybe Singapore? Apple will need to have both the labor force and the management force to expand to scale. So I would not read too much into a dateline of Tokyo as a hint for where manufacturing might end up.

    1
    May 21, 2022
    • Robert Paul Leitao said:
      David: Thank you. That’s a reasoned point. Consider, too, components are provided by contract manufacturers and facilities are not owned by Apple. Expanding manufacturing capacity to other countries requires much planning, negotiation, and likely order guarantees to support contractor investments in new facilities and in different countries.

      0
      May 21, 2022
  2. Alan Trerise said:
    Apple has made 2 robots to take iPhones apart. It seems to me an appropriately designed iPhone could be assembled by a robot. I have to believe they are looking at this.

    3
    May 21, 2022
    • Robert Paul Leitao said:
      Alan: I’m sure production will be increasingly automated. One of the advantages of assembling products in China is the close proximity to the facilities of contract component manufacturers. It provides impressive levels of efficiency. It will take time, planning and significant logistical considerations to expand manufacturing operations to other countries in the region. It’s certainly not an insurmountable challenge. There’s just a lot of “moving parts.”

      1
      May 21, 2022
  3. Robert Paul Leitao said:
    For those who don’t have a WSJ subscription, the full article can be accessed through the WSJ feed in Apple News+. Apple has through its contract manufacturers a significant presence in China and the company likely will proceed slowly and discreetly in expanding manufacturing in other countries in the region. Obviously, China’s COVID lockdowns and the current travel restrictions are a point of pain for the company. I don’t see Apple making abrupt moves to transfer current production in China to other nations in the region. However, for strategic reasons, gradually diversifying Apple’s production base makes sense and can be accomplished in a methodical way such as systematic additions to capacity in other countries in the region to meet increasing global product demand. In other words, I don’t expect Apple to be importing products produced outside of China into that country anytime soon. This will take time and progress is likely to be measured over years.

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    May 21, 2022
  4. Jerry Doyle said:
    “…. People who have spoken with Apple about its manufacturing plans said the company sees India as the closest thing to the next China, owing to its large population and low costs.”

    While I have an optimistic perspective toward the role India can play in the manufacturing and assembling of Apple products, I am skeptical of India’s burdensome regulatory environment and stifling regulatory oversight. Vietnam is more consistent with China’s capitalistic instinct of reducing burdensome regulations for the purpose of facilitating production. I see Beijing’s authoritarian Communist government more as an asset for Apple similar to what Vietnam Communist government would be to the tech titan. Additionally, I also believe Vietnam is more competitive than India. What worries me at night is all the regulatory oversight agencies in India and how they can make work for Apple so burdensome.

    Candidly, Apple may diversify its manufacturing more to other geographic regions outside China, but to believe that Apple is going to reduce its presence in China to any significant degree is erroneous thinking. Apple knows where its biscuits are buttered and China also offers superb jams and jellies to go with that premium quality butter.

    3
    May 21, 2022
    • Robert Paul Leitao said:
      Jerry: I appreciate your descriptive metaphors and I agree substantially with your view point. Apple may be compelled to make products for India inside the country, but I really don’t see India as a “hub” for manufacturing for the world at this time. I also agree Apple is unlikely to move substantial production out of China. There’s too much to be gained (and maintained) by keeping most production inside the country. However, it’s prudent to have manufacturing operations outside China to provide for product in the event of unique and country-specific situations such as what Apple is grappling with today.

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      May 21, 2022

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