Apple is looking to ramp up production outside of China, the Wall Street Journal reports, echoing similar headlines before the pandemic.
This time, the tech giant is apparently urging its manufacturing partners to consider moving some production out of China due to frustrations over the country’s strict covid-19 protocols, which have led to lengthy shutdowns. hundreds of millions of people and travel restrictions.
Apple has long relied on China for the vast majority — more than 90%, the Journal writes — of its manufacturing. A small percentage of its products are made in India and Vietnam. Now Journal sources, identified only as people familiar with the talks, say the two countries have been singled out as potential destinations for further manufacturing.
Apple’s move away from China may just be the start
If the report is accurate, Apple’s rebalancing away from China could cause other tech companies to follow suit.
China is already experiencing a sustained decline in foreign investment with outflows reaching $17.5 billion in March alone, according to recent data from the Institute of International Finance (IIF), a US-based trade association. He called the change “unprecedented”. It’s also unique: Other emerging markets haven’t seen the same investor response during the pandemic, the association said.
China’s refusal to condemn Russia’s invasion of Ukraine and its ongoing war is another reason American investors and companies are pulling out of the country. Political analysts further fear that China may feel emboldened by Putin’s war in Ukraine to follow through on plans to attack Taiwan.
Meanwhile, the country’s unparalleled zeal in pursuing a “covid zero” strategy, not to mention the energy crises that led to blackouts in 2021, have also raised concerns about its national economy. Besides Apple, big companies like Starbucks, Dupont and Estée Lauder have all blamed the long covid lockdowns for operational hurdles and slowing sales, CNBC writes. Before the pandemic, Apple was also motivated to move some of its production out of China due to its exposure to geopolitical risks.
Quartz has contacted Apple for comment.
Don’t expect drastic or sudden change
Despite the snowballing list of reasons why China may seem less attractive to U.S. companies, some analysts say they don’t expect drastic or rapid changes.
Apple has spent decades building its assembly centers and relationships in China, where it has access to a large pool of skilled talent and a solid infrastructure, the Journal also points out. Additionally, like other US-based companies, manufacturing products in China gives Apple easier access to China’s huge domestic consumer market.
“Supply chain diversification is quite tricky because people are always talking about it and boards love to discuss it,” Nick Marro, head of global trade at The Economist Intelligence Unit, told CNBC recently, “but often ultimately people find it difficult to implement.”