Background: The challenge
Reducing Apple’s dependence on China as a manufacturing hub is one of the company’s biggest challenges – but has also become one of its top priorities.
It’s a challenge for the very reason Apple chose China as its manufacturing base in the first place. Dating back to 1980, the Chinese government put a great deal of work into establishing the country as a whole, and the Shenzhen area in particular, as the manufacturing center of the tech world. Its policies include relaxed planning regulations and generous tax incentives for manufacturers, as well as specific measures to maximize the appeal of foreign companies partnering with Chinese businesses.
Over a 42-year period, a massive network of Chinese suppliers has been established in and around Shenzhen, meaning that almost any component a tech company might need for its products is readily available in the local area, vastly simplifying supply chains.
A recent analysis suggested that reducing Apple’s dependence on China by just 10% would take eight years.
But the need has never been greater
What might once have seemed a farfetched disaster scenario for Apple is now considered a very real risk: a Chinese invasion of Taiwan. The country is likely to have been encouraged by the relatively weak response of the west to the Russian invasion of Ukraine, especially now that Putin has annexed four regions of the country to little more than diplomatic objection.
A recent survey of US businesses with manufacturing operations in China revealed no fewer than 10 different concerns, ranging from COVID-19 shutdowns to fears about Chinese companies stealing their intellectual property.
AirPods to be made in India
Nikkei Asia reports on Apple’s latest response.
Apple is asking suppliers to move some AirPods and Beats headphone production to India for the first time, in a win for the South Asia nation as it attempts to rise in the global supply chain.
The move is part of Apple’s gradual diversification from China, as it looks to lower the risk of supply chain disruptions stemming from the country’s strict zero-COVID policy and tensions with the U.S.
The report says that Apple has asked them to be ready for Indian production as early as next year.
Apple had already moved a significant proportion of AirPods and Beats production from China to Vietnam, and today’s report says that the latter country now accounts for the majority of Beats manufacturing. An expansion of AirPods and Beats production into India, however, would be a first.
India has become a second major manufacturing hub for Apple, and is expected to be responsible for a full quarter of iPhone production by 2025.
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