From Made in China to Make in India: How Apple is reducing reliance on its Chinese supply chain
- Apple buyers are facing longer wait times for the company’s flagship MacBook Pro laptops, mainly due to the lockdown in China.
- The delays reflect Apple’s struggles to keep its Chinese supply chain running smoothly amidst another Covid outbreak.
- At this point, the US giant’s second-largest Chinese assembly plant suspended production at key factories in Shanghai and nearby Kunshan.
- Apple has also started making the iPhone 13 in India as it expands its production capabilities outside of China.
Apple Inc’s dependence on China has long been a recurring concern. From the time since the trade wars between Washington and Beijing took place, to when Apple’s suppliers in China were affiliated to the forced labor program and the most impactful yet–Covid-19-related supply constraints. All of which highlighted the urgency for Apple to reconsider its production base to its next best option–India.
When Apple first entered into the buoyant Indian manufacturing space back in 2015, the company had been aggressively expanding its market share while augmenting its manufacturing capabilities in the country. Gradually, more of Apple’s products were being assembled in India and under the ‘Make in India’ initiative. In short, the American tech giant has gradually been developing its manufacturing capacities outside its traditional base of China.
It’s not just India alone–in fact even Mexico and Vietnam are becoming increasingly important to contract manufacturers supplying as Apple tries to diversify production away from China. The most recent update, according to Reuters, is that Apple has started making the iPhone 13 in India, the world’s second largest smartphone market.
According to Reuters’ sources, the phone is being produced at a local plant of Apple’s Taiwanese contract manufacturer Foxconn, situated in the town of Sriperumbudur in Southern Tamil Nadu state. For context, the iPhone 13 is the fourth model to be produced locally after Apple launched manufacturing operations in India in 2017 with the iPhone SE, rather than simply running its assembly line.
Foxconn, the manufacturer of Apple’s iPhones has previously announced plans for creating 10 to 12 facilities in India, which would include factories and data centers. Although Foxconn has long based most of its operations in China, increasing labor costs and deepening US-China tensions has prodded it to look elsewhere. Considering this, India has deftly taken the chance by tempting major smartphone manufacturers with attractive subsidies.
Currently, all iPhones are manufactured by three Taiwanese firms: Foxconn, Pegatron, and Wistron. At this point, even Pegatron has halted operations at two subsidiaries in the Chinese cities of Shanghai and Kunshan, as global supply chains feel the pinch of Beijing’s strict zero-Covid measures.
That said, Pegatron’s suspensions mark the latest blow to Apple, which has seen disruptions at other suppliers’ assembly lines in recent months as Chinese cities struggle to curb virus outbreaks. Foxconn even halted operations in the tech hub of Shenzhen by March itself. A latest report by Bloomberg also indicated that Apple’s latest high-end models are now seeing delivery estimates pushed into June as supply chain snags are worsening again.
To recall, in August 2020, Foxconn and Pegatron were among companies said to be eyeing new factories in Mexico to dilute business risks. Pegatron meanwhile was reportedly mulling a US$1 billion investment in production facilities in Vietnam.
At this juncture, despite numerous efforts by Apple and its partners to diversify their supply chains, China still remains a major manufacturing hub. The tech giant, due to announce its second-quarter earnings results on April 28, is expected to give investors a window into its supply challenges.
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