Why Apple Can’t Quit China?

Apple’s supply chain has had a longstanding presence in China. However, the tech giant has been reshaping its global supply chain landscape in the last few years by relocating a substantial portion of its supply chain operations to other countries.

While Apple has been making conscious efforts to not be overly reliant on China, especially considering the political tension between China and the U.S., cutting off China’s supply chain is a huge task. 

This was revealed by Apple’s recent announcement of its supply chain list for fiscal year 2023. 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

On the other hand, the company has also dropped 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

For many years, China has been a significant player in Apple’s supply chain, contributing 42% of the company’s annual production.

In 2020, Apple increased its number of Chinese suppliers to 51, up from 42 in 2018.

This dominance is due to Apple’s deep-rooted connection with China which makes it difficult for the tech giant to move away. China offers a massive industrial infrastructure, a large, affordable, and skilled labor force, low production costs, and the ability of Chinese manufacturers to automate production lines.

Moreover, the complexity of replicating China’s capabilities elsewhere, the challenges in finding alternative locations with the necessary skills and volume, and the intricate relationships Apple has established with Chinese partners all contribute to the difficulty of shifting its operations entirely out of China. 

However, the ongoing US-China trade war and rising labor costs in China have prompted Apple to diversify its supply chain.

Despite this, Chinese suppliers offer high cost efficiency and a low turn-around time for production, making them an attractive option for Apple. While Apple is exploring diversification by moving some production to countries like India and Vietnam, the intricate web of factors tying Apple to China makes a complete disengagement a complex and lengthy process. Thus, Apple will shift towards a more diffuse production network and continue to expand its supply chain in nations like India, Vietnam, and now Indonesia.

Also Read: Apple’s Tim Cook Charts Course for Manufacturing in Indonesia, Redefining Supply Chain Footprint

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