Designed by Apple in California, assembled in China. It’s the phrase that one way or another has been seen etched into Apple products ever since a server goes through their teenage years. The ideas and the design are born in Cupertino, but the mass production of the components and the final device are ordered in China.
This couple seemed inseparable, but a series of circumstances made the impossible possible: that Apple decides to diversify its production outside this country. And that, as CNN said this summer that it was impossible to replicate China’s production capacity elsewhere, is quite a challenge.
The end of China as the “factory of the world”
What caused this situation? There are several factors at play. First, the COVID-zero policy China is causing levels of restrictions and protests rarely seen in the country: just because of them, six million fewer iPhones are already expected to be manufactured than originally planned. And fewer iPhone units available globally, less sales and less revenue. And just at Christmas, when the demand is very high.
The situation has reached such a point that the Chinese government is turning to army veterans to work in these factories, with the aim of having as many employees as possible ready to work. Demand reigns.
China’s demands on Apple ended up accelerating its decision to move some production to other countries
Algo que también se debe de tener en cuenta son las exigencias que China ha ido poniendo encima de la mesa de Tim Cook: tener cierta manga ancha con la privacidad de los usuarios de China, pagos de centenares de millions de dólares para poder hacer negocio en the country
let’s not forget that the geopolitical situation It also has a lot to do with it: the Russian invasion of Ukraine has raised tensions between China and Taiwan, and Apple does not want to be involved in a possible conflict which would harm (a lot) the production of the vast majority of its products. . A Chinese invasion of Taiwan would trigger sanctions, escalate the global trade war, and seriously harm the production of most electronics. Not only from Apple, but from all major brands.
India, Taiwan, Japan, Vietnam… the countries that want a piece of the cake
Which countries have taken advantage of this situation? More or less importantly, we have India, which took the opportunity to grant tax advantages to Apple in exchange for starting to produce some of its products in its territory.
Apple’s love affair with China is ending and India/Vietnam seem to be the winners.
In 2017, Apple listed 18 major vendors in India and Vietnam; last year there were 37https://t.co/tbibRktTCi pic.twitter.com/G53gKdPEIc
Subrahmanyam KVJ (@SuB8u) November 3, 2022
However, we do not believe that starting production in different countries is a matter of months: it will take years to see significant changes. By 2025, India will manufacture 25% of Apple products, with China taking care of most of the remaining percentage. And these are just predictions made on paper.
Taiwan itself is also starting to take advantage of what’s happening with China, embracing the manufacturing of certain components like mini-LED displays. At the same time, Vietnam will have its own Foxconn factory to manufacture iPad and iPhone models, and we are starting to see traces of chip manufacturing in Arizona, in the United States where global geopolitics no longer has any effect. of importance.
Japan has also taken steps to host the production of some TSMC components. And let’s not forget the European Union which also wants to play its part in this great game: Italy will have an Intel chip factory while a design headquarters for these components has already been confirmed in Barcelona by Cisco.
What can we expect for the future? If nothing changes, maybe we’ll see how this diversification of production is accelerating over the next few years. Apple (and other companies) will want to be more careful and will sacrifice the advantages of producing in China in exchange for not being fully involved in a wave of protests like the ones that are already happening or an international conflict similar to the one we have in Ukraine.
If the ultimate goal is to take all of China’s production capacity, it will take many years to see. But by the end of the decade, your iPhone could be made in India, your iPad could be made in Vietnam, and your Mac chip could be from Texas. A scenario that was described as impossible will gradually become reality.
Picture | Brian Matangelo
