Apple suppliers’ exodus from China won’t slow down under Joe Biden

The gimmick of the global technological supply chain that began during President Donald Trump’s watch persists under his successor.

Apple Inc., the largest of many tech giants that depend on Chinese factories to make their gadgets, will transfer some production of its iPads and MacBooks to Vietnam. The leading assembly partner, Hon High Precision Industry Co., also known as Foxconn, has allocated $ 270 million in new investments to the Southeast Asian country. These steps sustain a large and prolonged migration in which the role of the iPhone manufacturer as well as China can be as a workshop for the world.

Foxconn founder Terry Gow coined the term “G2” to describe the trend of a supply chain split into at least two.

Company President Young Liu said in August that the likes of India, South East Asia and the US could each end up with their own dedicated manufacturing ecosystem in the future. Now this trend seems irreversible as other countries including India and Vietnam are promoting their infrastructure and efforts to woo manufacturers through lower costs and lower geopolitical concerns.

“As China becomes more expensive, and as American politics has been unpredictable, companies have shifted production of some goods out of China. This trend will continue as China becomes more expensive and as Vietnam And India improves its competitiveness, ”said Dan Wang, a technology analyst at GevCal Dragonomics.

Trump’s trade hostility against China prompted many manufacturers to shift production capacity to neighboring countries such as Vietnam and pursue sites in Mexico and India to reduce the risk of slapping with punitive tariffs and future sanctions to do. Apple, whose chief executive Tim Cook has built its current Chinese-centric production chain, has protested the move in a big way but has increasingly explored alternatives in recent years.

The Cupertino, California-based company continues to ramp up iPhone capacity in India through its assembly partners, according to Prime Minister Narendra Modi’s policy to attract top-tier smartphone companies to export their gadgets locally . The last of the major iPhone assemblers in the country, Pegatron Corp. Announced earlier this month that it was injecting $ 11 billion ($ 150 million) into its Indian unit and would begin production as soon as 2021.

Back at home, the iPhone manufacturer is lobbying the US government to support local chip production with tax. Its major supplier, Taiwan Semiconductor Manufacturing Company, is planning a chip fab in Arizona, although the facility’s modest scale and technology would suggest it serves smaller customers, at least to begin with.

Beyond Apple, Alphabet Inc.’s Google has placed orders with Foxconn to assemble key components for its servers in Wisconsin, best-known for its yet-to-be-used facility. Mass production is expected in the first quarter. Pegatron executives said earlier this month that the company also plans to set up manufacturing operations in the US to serve other customers.

Wistron Corp., another Taiwanese contract manufacturer that produces iPhones as well as laptops and servers for other US customers, announced plans to add capacity in Mexico and Taiwan earlier this month. It is also purchasing a Western Digital Corp factory in Malaysia. Chairman Simon Lin said in March that as Vistron’s half-capacity could be located outside China by 2021, Vietnam’s operations have gained momentum and the company remains an important strategic destination for India for the next decade due to its market size and res Seeing as.

Trump’s tariffs on Chinese-made products have also forced other international companies to rethink their manufacturing.

Operations. The Nintendo company now has some of its own switch console production handled by Sharp Corp in Malaysia, after which it asked its main assembly partner Foxconn Technology Company to give geographic options to its core China operations. Foxconn Technology Group and Sharp Shareholder’s flagship unit Foxconn Tech formed links between the two Japanese firms.

While Apple is diversifying its global supply chain, it is also deepening its relationship with local Chinese manufacturers to serve domestic markets. Earlier this year, China’s LuxShare Precision Industry company struck a deal to acquire Wistron’s iPhone production facilities in the country, a move that would make it the first mainland company to assemble Apple’s marquee handsets. Competitor BYD Electronic International Co. is also now splitting iPad orders with Foxconn and Complex Electronics Inc., a person familiar with the matter said. Meanwhile, AirPods‘ orders are now dominated by LuxShare and another compatriot, Goertech Inc.

Foxconn took 30 years to build its large-scale Chinese operations and is unlikely to hold India or any other region overnight, Foxconn’s Liu said earlier this month.

Guval’s Wang said “the supply chain will take time,” and China will remain a major electronics manufacturing center for at least the next five years.

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