Apple has recently made an effort to move some of its production away from China to India, Vietnam, etc. However, a new report predicts that it will take the Cupertino tech giant almost a decade to move just 10% of its production away from China.
It could take Apple a decade to diversify its supply chain
Apple, Google, and other tech companies have reportedly been trying to shift their production away from China to reduce their reliance on the country. There are numerous reasons for this including geopolitical tensions, unstable production, and an increase in labor costs.
Now, Bloomberg Intelligence estimates that it would take the Cupertino tech giant eight years to move just 10% of its production capacity outside of China, where almost 98% of its iPhones have been made.
The reason why it would take Apple such a long time to move production away from the world’s second-largest economy is that China is well versed in the production of electronics. As BI notes, “scores of local component suppliers, modern and efficient transport, communication and electricity supplies,” make it incredibly difficult to find such a developed system elsewhere.
“With China accounting for 70% 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,” BI’s report from analysts Steven Tseng and Woo Jin Ho said.
The report notes that Apple’s main supplier, Foxconn, has agreed to expand its production facilities in Vietnam. The expansion is reportedly worth $300 million. But, the facilities will take years before they are fully functional. Foxconn’s first major move in moving production to Vietnam was when it was awarded a license to build a $270 million plant in the region. Prior to that, the supplier had invested $1.5 billion in the country.
As for the dependence of the overall technology industry on China, the report estimates that it can be reduced by 20%-40% “in most cases” by 2030. And hardware manufacturers will be able to reduce their reliance to 20%-30% in the same timeframe.