Apple doesn't want to reduce its reliance on China despite trade war

[nanoguy]

In context: Apple is optimistic about the future despite the effects of tariffs, slowing iPhone sales and coronavirus quarantines in factories. The company's dependency on China remains strong, but some executives have pushed against that since 2015.

It's a well-known fact that Apple relies heavily on China for its manufacturing needs. For the past few years, the Cupertino giant has been exploring ways to shift production to other places like India and Vietnam, but not even a trade war or coronavirus have made that more likely to happen in any significant capacity in the near-term future.

The coronavirus crisis, in particular, has put a lot of pressure on manufacturers like Foxconn and suppliers like Genius Electronic Optical, to the point where it looks like production will ramp up slowly over the next few months.

It turns out that Apple's insistence on keeping its dependence on China has deeper roots. According to a report from the Wall Street Journal, some company executives have suggested moving the assembly of at least one product to Vietnam, an idea that has been "rebuffed" by senior management.

The proposal dates back to 2015, and the reasoning behind it was that relocating production of a product to Vietnam would kickstart a "multiyear process of training workers and creating a new cluster of component providers" outside of China. Higher-level executives dismissed the idea, invoking the difficulties and risks of such an undertaking.

Apple does make some older iPhones in India, including the iPhone XR. The Wall Street Journal says the company even planned to assemble the iPhone 11 in the country, but eventually realized that India didn't have enough skilled labor or a sufficiently robust infrastructure, so it opted to make the handset in China.

Foxconn has shown its intentions to expand to Vietnam, but just like India, it has a long way before there are enough local suppliers and skilled workers that can produce Apple's premium iPhone models with OLED displays. Instead, the company only makes the AirPods Pro in Vietnam, mostly to avoid import tariffs in the US.

Tim Cook may have made Apple too dependent on China, which is evident in a recent interview with Fox Business where he was asked about moving beyond the region for its manufacturing needs. He noted that "the question for us after we get on the other side will be ‘Was the resilience there or not, and do we need to make some changes?’ My perspective [...] is that if there are changes, you’re talking about adjusting some knobs, not some kind of wholesale fundamental change."

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https://www.techspot.com/news/84243-apple-doesnt-want-reduce-reliance-china-despite-trade.html

 

[brucek]

Headline is BS. The issue is that Apple does not feel it is able to reduce its reliance on China. That's very different from not wanting to.

If there was a simple yes/no button executives could push to have access to the same manufacturing scale, cost, and yield they can currently get only in China in multiple other countries too, of course they would all push that button.

 

[Morris Minor]

Yeah china isn't the only place apple can use for slave wage workers. to think it cost them under $100 to make a phone they sell to muppets for $1000. But them isheep really need that apple badge.

 

[brucek]

Read and understand the full article, or better more detailed versions of it that have appeared elsewhere. Yes, there are many places in the world with similar labor costs. But that's far from the only ingredient required. You also need skilled manufacturing engineers supporting the lines, as well as many other manufacturing and component infrastructure pieces, all of which has to be available sufficiently close by and in sufficient scale to not wreck the overall economics.

 

[Vulcanproject]

It's curious to me.

India seems frequently disappointing from a business investment standpoint. They have been an independent nation for 70 years now. But they still fail to organise their massive, incredibly young workforce anything like as well as China. Who have only been doing this socialist market economy (cough, authoritarian capitalism) thing for 35 years, at most. More like 20 or so if you go from the privatization of large firms. It's even more mystifying when you realise only the USA has more English speakers than India, a language that does tend to give you a leg up in international business.

Authoritarianism has a lot to answer for but it seems to me the stark contrast between those nations, that is the standout difference. From the organisation of labour and infrastructure in China to the general colourful, chaos of India.

 

[Evernessince]

It's curious to me.

India seems frequently disappointing from a business investment standpoint. They have been an independent nation for 70 years now. But they still fail to organise their massive, incredibly young workforce anything like as well as China. Who have only been doing this socialist market economy (cough, authoritarian capitalism) thing for 35 years, at most. More like 20 or so if you go from the privatization of large firms.

Authoritarianism has a lot to answer for but it seems to me the stark contrast between those nations, that is the standout difference. From the organisation of labour and infrastructure in China to the general colourful, chaos of India.

India has it's own set of problems, like it's leader's extreme racism, lack of infrastructure investment, education, ect.

40% of indian roads are still unpaved and many people still do not have basics like indoor plumbing.

They are still a 3rd world country based on their standard of living.

 

[Vulcanproject]

India has it's own set of problems, like it's leader's extreme racism, lack of infrastructure investment, education, ect.

40% of indian roads are still unpaved and many people still do not have basics like indoor plumbing.

They are still a 3rd world country based on their standard of living.

Well third world just means non aligned with the western NATO states or the Soviet Union. I guess it has come to mean something else for people today. India certainly has unique issues but even so it seems the lack of organisation is deeply rooted in culture and society. China for example has built thousands upon thousands of miles of quality road and rail network in the last two decades, good infrastructure means business growth, it's just a fact.

My point really is India has vast untapped potential and they really aren't maximising what advantages they do have, unlike the Chinese. Just look at how young India's population is, if you put it to work they would be a monstrous economic powerhouse. Instead those previously optimistic projections for growth have waned dramatically. Disappointing.

 

[JKnight]

The problem with India is the infrastructure and bureaucratic red tape. You have to bribe someone to get work done especially if you are a business.

 

[Mr Majestyk]

It's curious to me.

India seems frequently disappointing from a business investment standpoint. They have been an independent nation for 70 years now. But they still fail to organise their massive, incredibly young workforce anything like as well as China. Who have only been doing this socialist market economy (cough, authoritarian capitalism) thing for 35 years, at most. More like 20 or so if you go from the privatization of large firms. It's even more mystifying when you realise only the USA has more English speakers than India, a language that does tend to give you a leg up in international business.

Authoritarianism has a lot to answer for but it seems to me the stark contrast between those nations, that is the standout difference. From the organisation of labour and infrastructure in China to the general colourful, chaos of India.

The difference between India and China, is 90% of India's population is living in squalor barely able to make ends meet. You have small % of highly educated and relatively wealthy people. India maybe colourful and it's certainly chaotic, but they are still a third world country with a small core of highly skilled people.

 

[Morris Minor]

It's curious to me.

India seems frequently disappointing from a business investment standpoint. They have been an independent nation for 70 years now. But they still fail to organise their massive, incredibly young workforce anything like as well as China. Who have only been doing this socialist market economy (cough, authoritarian capitalism) thing for 35 years, at most. More like 20 or so if you go from the privatization of large firms. It's even more mystifying when you realise only the USA has more English speakers than India, a language that does tend to give you a leg up in international business.

Authoritarianism has a lot to answer for but it seems to me the stark contrast between those nations, that is the standout difference. From the organisation of labour and infrastructure in China to the general colourful, chaos of India.

it doesn't help when countries like mine take all the best and brightest, also known as a brain drain. Can't blame them though, you go where the money is.

 

[wiyosaya]

Typical crApple. It does not have enough money in the bank, yet.

 

[Rickysh]

You ignored one big factor:China market. China became the world's largest retail market in 2019.

 

[poohbear]

It's curious to me.

India seems frequently disappointing from a business investment standpoint. They have been an independent nation for 70 years now. But they still fail to organise their massive, incredibly young workforce anything like as well as China. Who have only been doing this socialist market economy (cough, authoritarian capitalism) thing for 35 years, at most. More like 20 or so if you go from the privatization of large firms. It's even more mystifying when you realise only the USA has more English speakers than India, a language that does tend to give you a leg up in international business.

Authoritarianism has a lot to answer for but it seems to me the stark contrast between those nations, that is the standout difference. From the organisation of labour and infrastructure in China to the general colourful, chaos of India.

If only it were that simple. Work ethic, location, culture (in particular Confucianism), history, & social mobility have a lot more to do with China being successful than simply "authoritarianism".

 

[poohbear]

The difference between India and China, is 90% of India's population is living in squalor barely able to make ends meet. You have small % of highly educated and relatively wealthy people. India maybe colourful and it's certainly chaotic, but they are still a third world country with a small core of highly skilled people.

That was exactly China right up to the 80s and even 90s. A quick google search shows China had an 88% poverty rate in 1981, and 0.7% in 2015. So the question is why did China change so quickly and not India?

 

[wiyosaya]

That was exactly China right up to the 80s and even 90s. A quick google search shows China had an 88% poverty rate in 1981, and 0.7% in 2015. So the question is why did China change so quickly and not India?

The answer is former president Nixon and the normalization of relations with China that arose from Nixon's visit there in 1972. IMO, this was the beginning of the chain of events that lead to the current situation.

My guess is that it was China's intention all along of taking advantage of the situation.