Apple’s dependence on China has been a topic of discussion for many years, and now Bloomberg’s research division has evaluated some of the costs associated with it.
According to analysis, it would take almost eight years to move only 10% of Apple manufacture out of China. Back in 2017, specialists discussed the enormous difficulty of moving sizable portions of Apple manufacture outside of China.
It’s no accident that much of Apple’s manufacturing happens in and around Shenzhen. First, the city is strategically-placed, serving as the gateway between mainland China and Hong Kong. It is one of the largest shipping centers in the world, with a massive container port.
Second, the Chinese government established Shenzhen as the first Special Economic Zone in the country. SEZs are designed to encourage enterprise through relaxed planning regulations and generous tax incentives – and, crucially, to facilitate foreign investment in local companies. It is this, as much as its geographical advantages, which has enabled it to grow at such a pace.
Many questioned the viability of this when a report from back in 2019 said that Apple’s goal might be to relocate as much as 15–30% of its manufacture out of China. Bloomberg’s analysis has supported the statement of Apple moving out of China.
Bloomberg Intelligence estimates it would take about eight years to move just 10% of Apple’s production capacity out of China, where roughly 98% of the company’s iPhones have been made. Scores of local component suppliers — not to mention modern and efficient transport, communication and electricity supplies — make it particularly difficult to get out of the world’s second-largest economy.
With China accounting for 70% of global smartphone manufacturing and leading Chinese vendors accounting for nearly half of global shipments, the region has a well-developed supply chain, which will be tough to replicate — and one Apple could lose access to if it moves,”
Analysts claim that compared to other US tech behemoths, Apple is in a much worse situation.
Apple’s exposure to China is also notably bigger than many others. Amazon.com Inc., HP Inc., Microsoft Corp., Cisco Systems Inc. and Dell Technologies Inc. also depend on China to produce hardware for servers, storage and networking products, but the extent of their dependence is far below that of Apple.”
In the last year, around a quarter of US companies with Chinese manufacturing operations transferred some output outside, but this typically only amounted to what is now known as the “China Plus One” strategy. The majority of the production is still done in China in this case, but a backup nation is also included.
It will be interesting to see how Apple copes up with the landscape shift judging by its dependency on Chinese suppliers.