Tech

Apple’s Tech Supply Chain Shows Difficulty of Dumping China

The tech supply chain of Apple consists of China-based companies. Other countries do not have the infrastructure to produce 600,000 phones a day. This situation makes it more difficult to find a viable substitute. Also, there are geopolitical tensions and power cuts in other countries.

With China accounting for 70 per cent 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,’ said analysts Steven Tseng and Woo Jin Ho.

Chinese companies are key to Apple’s supply chain

In recent years, Apple has grown to rely on Chinese companies for many of its supply chain components. Chinese suppliers have stepped in to provide Apple with the high-quality components it needs to manufacture its products. In fact, Chinese companies now account for more than 25 percent of the value of the iPhone. This highlights the country’s increasing dominance in the smartphone supply chain, according to Dan Wang, an economic research analyst at Gavekal Dragonomics.

As Apple continues to launch new products and entice consumers to spend more money, Chinese companies are essential to Apple’s success. Their efforts to deliver products are crucial, and these companies need to be able to deliver at full speed. However, the current events in China are likely to make delivering products more challenging than normal. For example, China’s supply chain is currently being disrupted by the recent sweeping lockdown in Shanghai and other eastern cities.

Geopolitical tensions

Apple’s tech supply chain may be in for a major shake-up due to geopolitical tensions. According to noted analyst Ming-Chi Kuo, the company may have to re-think its entire supply chain strategy. While the company’s past supply-chain management strategy was largely focused on quality and cost, rising geopolitical risks are causing the supply chain to become more complex. Kuo sees two main risks for Apple’s supply chain:

Tech companies from the U.S. rely on foreign suppliers to manufacture many of their products. If Chinese firms are unable to meet demand, the US tech industry could suffer. Some US companies have already started relocating production out of China due to geopolitical tensions. Others have started looking for alternative locations after Trump’s election, but the pace has accelerated in the past two years.

Power cuts

American technology companies have spent billions of dollars setting up complex production chains, which are essential to the growth of e-commerce. It would take several years to break up these ties, and the damage could be long-lasting. Recent events are a reminder of the risks of deep economic integration.

American companies have had a growing list of reasons to downgrade their ties with China in recent years. Former President Donald Trump’s tariffs. Beijing’s stringent Covid lockdowns. The US-Sino standoff over Taiwan. Political pressure to “friend-shore” supply chains toward nations aligned with Washington.

Economic growth

Apple has a much more extensive supply chain than other companies, but it still relies on China for many key products. Many other companies rely on China for servers, storage, networking, and other products. According to Bloomberg Intelligence, it would take eight years to move even 10% of Apple’s production capacity out of China. This is due in large part to China’s advanced supply chain.

The US tech industry relies on Chinese components and is becoming increasingly reliant on foreign suppliers. However, deteriorating Taiwanese relations and the growing difficulty of meeting demand in China could have a negative impact on the US tech industry. Moreover, US allies aren’t convinced by Yellen’s “friend-shoring” strategy and have warned against isolating China.