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Wisdom on March 1, according to Bloomberg, 9 of Apple's 10 most important suppliers are preparing for large-scale transfers to countries such as India. Bloomberg Intelligence estimates that it could take 8 years to move 10 percent of Apple's production capacity outside of China, and executives at Apple's Chinese foundry, Goertek, believe the shift will be much faster than that.
However, Apple's accelerated process of getting rid of "Chinese dependence" is not smooth, according to Reuters, a fire in the factory of Indian Apple supplier Foxlink has led to the shutdown of iPhone chargers, of which 10 assembly lines, 4 have been completely destroyed, and more importantly, the factory is unlikely to resume full production within two months.
First, Apple stepped up its layout in India and Vietnam
In February this year, Apple released its first-quarter earnings, with revenue of $117.145 billion in the quarter, down 5% from $123.945 billion in the same period last year. Faced with doubts, on the one hand, he "dumped" it to Chinese factories, saying that last year Zhengzhou Foxconn suffered an epidemic, and workers did not hesitate to walk home and were unwilling to continue working, resulting in insufficient production capacity; On the other hand, he said that he would move the industrial chain out to diversify risks.
India is a country that Cook is bullish on, and "the market is exciting." In addition to this, he confirmed that Apple will soon open its first Apple flagship store in India. Apple's local ads in India are also telling future local employees that they will develop new businesses in India, service all of Apple's product lines, and build the factory of the future. On the other hand, India is also strongly promoting Apple's supply chain.
In fact, the migration of the Apple industry chain is not new. Goertek Vietnam executives said U.S. technology companies have been pushing manufacturers like Goertek to explore alternative locations. Vietnam is Goertek's only production base outside China.
Kazuyoshi Yoshinaga, vice chairman of Goertek, also mentioned in an interview that he is considering expansion to India while investing $280 million in a new factory in Vietnam.
▲Goertek's factory in Vietnam
"Most Chinese Apple supply chain vendors face the same problem," the executive said, adding that it was Apple's decision. Goertek also plans to start producing VR (virtual reality) headsets in Vietnam in 2024, and Goertek expects that its business in Vietnam will account for more than half of Goertek's global revenue within three years.
Second, the yield rate is low, labor contradictions, the next "Foxconn" is so difficult
The local fire department responsible for the fire at Foxlink's plant said that in addition to the fire extinguisher, safety systems such as smoke detectors, sprinklers and hydrants were faulty, resulting in a slower response to controlling the fire.
▲The scene after the fire at the Foxlink factory
In fact, this is not the first shutdown of Apple's factories outside China, after Foxconn and Wistron have encountered serious labor problems in overseas factories, resulting in temporary shutdowns.
In addition, although the dual advantages of production and market make India have the advantage of China becoming an Apple foundry at the beginning, there is still a big gap in logistics, tariffs, infrastructure and other aspects compared to China.
Duff Evans, CEO of San Francisco-based supply chain company Fictiv, once commented that there is no place in the world other than China that has such infrastructure to make 600,000 mobile phones a day.
A New York Times article, "An iPhone's Journey, From the Factory Floor to the Retail Store," points to the government's support for providing funding, energy, and reducing transportation costs by paving roads and building power plants.
At an electronics enclosure factory operated by Apple supplier Tata Group in Hausour, about one out of every two components produced first meets the standard, and the 50% yield is obviously extremely poor. But the giant is buying an iPhone assembly plant from Wistron, which is looking to exit the Indian market after labor unrest and protests in 2020.
A person familiar with the plan said Apple is pushing for things and intends to give Tata a majority stake rather than a 50:50 joint venture structure.
A person involved in Apple's operation even compared Southeast Asia to India, pointing out that thanks to the signing of the Regional Comprehensive Economic Partnership (RCEP), Apple's industrial chain in Southeast Asia has diversified more smoothly, because the signing of RCEP includes China and ten ASEAN countries.
Well-trained labor, low costs and a network of parts supplied by local in-house R&D companies will make it difficult for Apple to regain these advantages in the short term if it moves its capacity elsewhere. So the more likely path is "China + (China plus)", that is, China is the main production place, plus another country to supplement production.
Conclusion: Apple's exit from China's supply chain is a long and long way
Due to the quality of workers and infrastructure problems, the transfer of fruit chain to India, Vietnam and other countries is frequently facing challenges, and the Chinese suppliers of the apple industry chain are still in a leading position.
At present, the production of Apple products is inseparable from the Chinese supply chain, but due to pressure from all parties in the United States, Apple has to transfer the supply chain out of China. The transfer of Apple's supply chain is a long-term process, and there will be variables in the countries and companies involved.
In addition, Chinese companies also need to get rid of "apple dependence", and the loneliness of fruit chain giant OFILM is a lesson in the past. China's manufacturing, which has tasted the dividends of "globalization" and developed, must also participate in the new wave of global manufacturing with a new attitude.
Source: Bloomberg, Reuters, New York Times