Apple increases the Chinese brands in its supply chain


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Apple’s supply chain has long been associated with China. However, the company has made conscious efforts to shift its supply chain towards other countries. Considering the political tension between China and the U.S., Apple does not want to be too over-reliant on China. Nevertheless, it is a huge task to cut China off the supply chain. This is because China does not only produce the products cheaper, it also has the manpower to meet the production target. Apple recently announced its supply chain list for fiscal year 2023. The company’s announcement reveals that Chinese brands are not leaving Apple’s supply chain any time soon.

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According to the announcement, Apple has added eight new Chinese brands to its supply chain list. These Chinese brands are

  • Baoti Co., Ltd.
  • Jiuquan Iron and Steel
  • Sinopec Weiye Technology
  • Kaicheng Technology
  • Sanan Optoelectronics
  • Boshuo Technology
  • Tony Electronics
  • Zhenghe Group

Similarly, the company drops four other Chinese brands from the list. The dropped brands are

  • Jiangsu Jingyan Technology
  • Meiyingsen Group
  • Shenzhen Derun Electronics
  • Yishi.

China’s Dominance in Apple’s Supply Chain

China has been a significant player in Apple’s supply chain for many years, contributing 42% of the company’s annual production. This dominance is due to several factors, including China’s massive industrial infrastructure, a large, affordable, and skilled labour force, low production costs, and the ability of Chinese manufacturers to automate production lines.

However, the ongoing US-China trade war and rising labour costs in China have prompted Apple to diversify its supply chain. Apple has increased its number of Chinese suppliers to 51 in 2020, up from 42 in 2018. Despite this, Chinese suppliers offer high cost-efficiency and low turn-around time for production, making them an attractive option for Apple.

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India & Vietnam’s Emergence as a Key Player in Apple’s Supply Chain

India has emerged as a key player in Apple’s supply chain, with the number of Apple-related suppliers operating in the country increasing from zero in 2012 to 14 in 2022. The Indian government has aggressively pursued investment from companies like Apple, offering investment incentives, reforming wages, and improving infrastructure.

Apple has made significant investments in India, including the establishment of a manufacturing facility in Bangalore and the assembly of the iPhone 15 in India, just weeks after it started leaving factories in China. This move is expected to create millions of jobs beyond China, with the electronics workforce in Vietnam reaching 1.3 million in June 2022, a quadrupling since 2013.

Vietnam has also seen a significant increase in the number of companies assembling Apple products over the past decade, with a fourfold increase in companies assembling Apple products. Vietnam is the biggest winner in Apple’s supply chain shift, with smaller production hotspots appearing elsewhere in Asia.

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Producers from the US and Japan have reduced their footprint in China, even as Chinese firms join the supplier list at a rapid clip. Despite this, China still houses the majority of Apple’s device-making factories and will remain an integral part of the company’s supply chain.

Shift to a More Diffuse Production Network

The shift to a more diffuse production network is undeniable and accelerating. Apple is the bellwether of this shift, being one of the largest assemblers of electronics in the world and the most profitable. The company has a lot of weight to throw around when it comes to demands on suppliers and the way they operate. The historic shift promises to create millions of jobs beyond China, with the electronics workforce in Vietnam reaching 1.3 million in June 2022, a quadrupling since 2013. In India, the sector has created up to a million direct and indirect jobs since 2018, the Indian Cellular and Electronics Association estimates.

Conclusion

Apple’s supply chain is undergoing a significant shift. Due to several factors, including the ongoing US-China trade war, rising labour costs in China, and the need for diversification of supply chains, Apple wants to look beyond China. However, the company has no choice but to increase the Chinese brands in its supply chain list. China will remain an integral part of Apple’s supply chain for the foreseeable future. Nevertheless, the shift to a more diffuse production network is undeniable and accelerating.

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