Commenting on Apple’s supply chain management, TF Securities tech analyst Ming-Chi Kuo said that the “rising” geopolitical risks have compelled the tech giant to adopt a new strategy to maintain a steady production supply and profitable sales in China.
China is an important market for Apple with respect to production and sales. Because of its business with Chinese suppliers and manufacturing units in the country, the Cupertino tech giant is often under fire by human rights organizations and activities for not speaking against human rights violations committed by the Chinese government.
More importantly, local laws and the stifling relations between the United States and China in the recent past have created difficulties for the tech giant.
Apple’s supply chain management in China is no longer only driven by quality and cost
On Twitter, Kuo elaborated that previously, Apple’s supply chain management in China, one of the biggest global markets, primarily centered around quality and cost. However, the current geopolitical risks have created “new deglobalization challenges” for the company and increased the “complexity of supply chain management” in China.
Therefore, the tech giant has adopted a new management strategy with regard to China.
Challenge 1: Impact of geopolitical risks on sales in China (Apple’s most important overseas market).
Solution: Do business with more Chinese suppliers.
Challenge 2: Impact of geopolitical risk on supply efficiency.
Solution: Build more non-Chinese production locations.
Kuo’s assessment corroborates a report by Digitimes which reported that Apple is going to diversify the production of its MacBook Pro in China to avoid production delays in the future. And these claims are substantiated by Apple’s supply chain.
- Chinese manufacturers Luxshare, BOE, and SG Micro are part of the iPhone’s supply chain. Luxshare assembles iPhones, BOE supplies OLED displays for iPhones and recently added SG Micro supplies integrated circuits for the new iPhone 14 Pro and iPhone 14 Pro Max models.
- Since former U.S. President Donald Trump increased tariffs on Chinese goods, Apple has been gradually decentralizing its production locations outside China. The company’s partners have set up manufacturing units in Brazil, Vietnam, Indonesia, Malaysia and India. Impacted by the March 2022 lockdowns in China, Apple told its suppliers like Foxconn and Luxshare to increase production outside the country to avoid delays in the launch of the new iPhone 14 in September and other products.
A diversified supply chain in China will also reduce Apple’s reliance on a single manufacturer and avoid delays in products launch. Recently, the tech company shifted orders of approximately 10 million lenses from Genius to Largan to avoid any delays in iPhone 14 shipments.