Apple gets components from a wide range of suppliers that extend across the world. However, production and assembly are a completely different story, with a whopping 90% of the total production currently taking place in China. But if the company has its way, soon this could change.
Apple’s Production Could Be Moved Up To 30%
Due to the ongoing trade war between the United States and China, Apple would begin to expand its capital expenditure study team last December. The group is now composed of more than 30 people and is actively discussing future plans with suppliers that could see between 15% and 30% of the company’s total production in other countries.
According to people familiar with the issue, Apple has asked some of its most important suppliers to evaluate the cost. Specifically, the major manufacturers of iPhone, MacBook, iPad, and AirPods, including Foxconn, Inventec, Pegatron, Quanta, and Compal are actively preparing business plans. Meanwhile, other vendors are closely monitoring where these companies change to adapt their business models while claiming that Apple is negotiating possible financial incentives with some governments while studying local regulations and corporate environments.
The Cupertino-based company and its suppliers are considering a wide range of locations including Mexico, Indonesia, and Malaysia, which should be able to provide the necessary infrastructure and guarantees for the start of production by Apple. Ultimately, however, both India and Vietnam seem to be favorites for diversifying iPhone production.
According to today’s Nikkei report, Apple has not yet set a deadline for suppliers to finalize the proposals. The smartphone giant seems to recognize the importance of this decision and instead chooses to work closely with others to achieve the best possible result. However, one supplier has admitted that the measure is a “long-term effort” that may not produce results until “within two or three years”. Apple would have required a minimum of 18 months to start production after selecting a location and an initial one. The output would be minimal to ensure that everything runs smoothly. But even so, things are not so simple.
While some manufacturers, like Foxconn, are ready to change production, for many others, the movement could have a negative impact on them financially. Some smaller suppliers would need to find new customers serving the Chinese market to maintain current production levels within the country and thus maximize margins. If this does not happen, the benefits could be severely compromised.
Apple will continue with the plans even if the trade war ends
While the trade war between the United States and China was the one that sparked Apple’s latest move, several sources claim that the company will not change its future direction even if the situation is resolved. Reportedly, the Californian brand has decided that relying too much on China for production is already a huge risk and will only continue to increase. After all, as one manager who is familiar with the issue has observed, China is experiencing a lower birth rate and higher labor costs.
The risk of centralizing production in one country will also not disappear. The United States and Japan have generally been the largest component suppliers to Apple, but last year these two markets were overtaken by mainland China and Hong Kong, which now have a total of 41 suppliers. This number should not diminish in the short term and even increase over time, so the diversification of production will give Apple greater flexibility.
(Via: Asian Nikkei Review)
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