UPDATED. 2019-07-23 09:43 (화)
Apple to take years to wean off of China: sources
Apple to take years to wean off of China: sources
  • Gijong Lee
  • 승인 2019.06.24 15:57
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iPhone maker asks suppliers to weight overseas option
Chinese productions take up 50% of Apple’s major supply chains
Apple CEO Tim Cook (right) visits the facilities of Chinese supplier OFILM.
Apple CEO Tim Cook (right) visits the facilities of Chinese supplier OFILM.

Despite Apple’s attempts to reduce its production reliance on Chinese facilities, it looks like it would take years for any of those suppliers to set up shop offshore, according to industry sources and the foreign press on June 19.

In addition to astronomical costs, there’s the enticing cocktail of infrastructure and government incentives are also making it difficult for such relocation to happen, they said.

“Relocating entire supply chains for suppliers requires a lot of time,” said the Taiwan Institute of Economic Research. "In particular, for smartphone makers that involve so many different parts, it would take an even longer time.”

The assessments come on reports that Apple has requested its key production partners in China to calculate the costs involving with moving 15-30% of its facilities to countries like Mexico, India, Vietnam, Indonesia and Malaysia.

Major iPhone assemblers Foxconn, Pegatron, Wistron, major MacBook maker Quanta Computer, iPad maker, Compal Electronics, and AirPods makers Inventec, Luxshare-ICT and Goertek were all asked to evaluate options outside of China, according to the Nikkei.

Nikkei Asian Review cited sources close to the matter who said that, “Apple has decided the risks of relying so heavily on manufacturing in China, as it has done for decades, are too great and even rising.”

The California-based tech company has been fretting over these and other fundamental problems for a while now, and the ongoing trade between Washington and Beijing is serving as yet another trigger, according to industry watchers.

“Apple has been fretting about falling birthrates, rising labor costs and increasing reliance on China for a while now,” said one source with knowledge on the matter.
Despite that 37% of Apple’s products are consumed within North America, China remains as its largest production headquarters that churn out 90% of its products.

The workforce, the network and the logistics are all part of the reason why this manufacturing hub has been created in China.

Last year, a total of 41 of Apple’s top 200 suppliers hailed from either China or Hong Kong. Another 46 came from Taiwan. Together, the 200 suppliers account for 98% of all of Apple’s material supplies, manufacturing and assembly.

When you put together the number of Chinese factories and the facilities operated by other foreign firms in China, there are 380 plants in China that are churning out Apple products, which is nearly half the number of plants included in Apple’s central supply system. The figure reflects a 7% increase from 2017 and a 14% increase from 2012.

The lack of the right facilities and infrastructure are two major reasons why it’s hard to make these plants relocate. For instance, India and Vietnam are both cited as candidates for iPhone productions, but they are far from prepared.

In India, there are only eight Apple production facilities, according to financial statement for the year 2018 unveiled by Apple this March. Three of them are plants run by Foxconn and Wistron, while another five are parts factories.

Since 2017, Wistron has been supplying budget iPhones, and Foxconn from this year, but the supplies are quite small.

Vietnam is another area Apple is considering. It’s not involved in the trade war between Washington and Beijing, it’s close to China, and it’s currently developing a supply chain cluster.

However, its Apple facilities are far from bustling due to a lack of necessary infrastructure including land. Supply company officials say that it takes at least 3-5 months just to evaluate the candidate land. In total, it usually takes around 18 months for production to begin.

China’s provincial government, on the other hand, made wide investments in infrastructure such as the sewage system, electricity, roads and dormitories in the 2000s. They also simplified trade and labor regulations.
Meanwhile, industry watchers say that even if the trade row between China and the US gets resolved, Apple will most likely continue to consider ways to disperse its Chinese facilities.

Another expert said that considering the massive costs involved, Apple appears to be rethinking its supply chain altogether.


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