Posted November 18, 2022
By Ray Blanco
New Horizons Outside of China
China has long been the dominant player in consumer electronics manufacturing, standing alone in its ability to bring on many high-skilled workers and develop the production capacity to handle the huge demand for the next hottest device.
But now, that’s starting to change.
The shift comes as a response to growing concerns about the geopolitical tensions and COVID-era supply chain disruptions that have become associated with doing business in China over the past few years.
Factory shutdowns, trade wars, IP theft and rising tensions with the U.S. and Taiwan have all weighed on China’s manufacturing empire.
Now, many companies have started looking elsewhere for manufacturing capacity over fears that a supply chain relying too heavily on China may push them into the middle of an escalating conflict.
However, this is no small feat…
Especially for Apple, which makes over 90% of its products in China. Either way, the process of moving out has been started.
Breaking up With China
Apple recently unveiled its new suite of iPhones, complete with a handful of new features. However, one feature will likely be unnoticed by most… For the first time, a small number of iPhones will be manufactured in India instead of China.
And it’s not just iPhones that are being made elsewhere.
So far this year, Apple has made a number of steps to diversify outside of China. Over the summer, Apple began manufacturing a portion of its iPads, Apple Watches and MacBooks in Vietnam.
Although a small step, the shift in manufacturing locations signals a broader move that is reverberating across Asia.
The splintering supply chain is responsible for a spike in industrial land prices in Vietnam, a manufacturing renaissance in Malaysia and a boost in worker demand in India.
The tech transition away from China is putting pressure on the country’s manufacturing activity. Meanwhile, the country is already experiencing its slowest economic growth in decades.
A lot of this started back before 2020 when the first outbreaks of COVID-19 shut down Chinese factories early in the year.
The shutdowns affected the bottom lines of many companies, including Apple, which had to cut its quarterly sales forecast that year due to its inability to pump out iPhones.
That marked the company’s first steps in looking for different manufacturing locations. Anticipating further shutdowns, Apple was looking to hedge against the growing risk of operating in China.
Of course, if Apple plans to fully evacuate China, the move will likely take decades…
The shift is also a part of a bigger movement for U.S. companies to cut ties with China as the Biden administration looks to diversify its supply chains with the recently signed CHIPS and Science Act assigning $50 billion direct aid for building semiconductor plants in the U.S.
While it’s not exactly building semiconductor plants, dissociating from China is politically advantageous for Apple’s image at home.