While US Tech Giant Apple’s Supply Chain Diversification Drive May Lead To Concerns, Apple’s Reliance On Chinese Market Is Unlikely To Change.

While US Technology Giant Apple’s Supply Chain Diversification Drive May Lead To Concerns Among Industry Watchers, Over Whether China Will Get To Lose As The World’s Top Factory Floor, Apple’s Reliance On The Chinese Market Is Unlikely To Change In The Short To Medium Term.

Apple is reportedly increasing the production of its iPhones and iPads outside of China. Specifically, manufacturers will start producing iPad models in Vietnam in the middle of this year, while Apple is also ramping up iPhone production in India, with its newly added facilities are expected to produce the latest iPhone 12 series in the first quarter of 2021, according to sources.

Apple has already relocated some Mac mini laptops production to Malaysia, according to recent Nikkei reports. Apple’s move comes against the lingering friction across spectrum of US-China relations that have withstood unprecedented headwinds in the past four years. Considering the Biden administration’s foreign policy toward China remains murky, some observers may read Apple’s new production plan as its means of hedging against any future political risks.

Yet, such viewpoint may overstate the impact of those uncertain political factors on Apple. Under the backdrop of increasing US-China tech competition, the US tech giant’s technology importance and economic significance can never be diminished. A great number of Chinese manufacturers are working within Apple’s supply chain, while Apple is the first company in the world to surpass $2 trillion market cap on the US stock market. Therefore, the political tensions and uncertainties between the two countries is unlikely to be a decisive factor in Apple’s decision, which may have more do to with global need for industrial chain adjustment.

It is also undeniable that China’s rising labor cost has led to an inevitable trend of the low value manufacturing lines gradually shifting away from the country, with India and Southeast Asia the most likely destinations to take on these production lines due to their relatively low wage standards.

The growth potential posed by these emerging markets may also explain the US business’ production plan. Apple’s iPhone production in India doubled year-on-year to 1.5 million units in the fourth quarter of 2020, according to statistics from research firms Counterpoint and CyberMedia. Despite the difficulties of setting up factories in India, the country’s market size and higher tariffs on imported electronic devices have forced many foreign manufacturers to produce locally.

By comparison, Apple’s plan to increase production capacity in Vietnam may be more reasonable given its growing competitiveness in electronics contract manufacturing. Still, there is no need to speculate the future of US-China relations through the prism of a single company’s move. As usual, economic and trade issues should not be politicized to send out misleading signals to the market.

As long as China remains an important consumption market, companies like Apple will always be dependent on this market and cannot afford to ignore it, even if they may choose to build up production capacity elsewhere.. 

This news was originally published at Global Times.