Apple clings to Southeast Asia

Apple CEO Tim Cook arrived in Indonesia in a "special forces" style after his visit to Vietnam, and revealed his intention to consider building a factory here. Since the beginning of the year, Apple's determination to expand faster in Southeast Asia has gradually emerged. Looking ahead to the next few years, Apple will continue to strengthen its "firepower" in Southeast Asia, not only in the supply chain, but also in consumer goods. After all, with shipments declining and existing users saturated, the relatively sinking market in Southeast Asia is expected to bring more sales to Apple.

From Hanoi to Jakarta

On April 17, local time, Cook met with President Joko Widodo in Indonesia to discuss Apple's investment in Indonesia and other issues.

After the meeting, Cook said that Apple would study the possibility of establishing a production facility in Indonesia, "and we talked about the president's desire to see manufacturing develop in Indonesia, which is something that we will consider".

Indonesia's Industry Minister Agus Gumiwang Kartasasmita, who also attended the meeting, said in an interview that if Apple decides to build a production facility in Indonesia, it will be able to produce products locally for export.

"We will discuss how Apple's factory in Indonesia can be part of the global supply chain," he said, adding that even if Apple does not build a factory, it can work with Indonesian companies to get parts. The Indonesian government wants Apple to use more Indonesian-made parts for its phones.

Just two days ago, Cook visited Hanoi, Vietnam, and pledged to increase investment there. According to Apple's statistics, the company has spent nearly 400 trillion VND (about $16 billion) in Vietnam through its supply chain partners since 2019.

Also since 2019, the company's annual investment in Vietnam has doubled. At present, Vietnam's "Apple Chain" has brought more than 200,000 jobs to the local area, including employees of Apple and local suppliers, as well as local iOS ecosystem app developers. Since 2017, the number of local software developers has tripled, and Vietnam is now among the top five producers of mobile games in the world.

Currently, Apple does not have a factory in Indonesia. However, three developer academies have already been established, and Cook's trip will also inaugurate Indonesia's fourth developer academy in Bali.

It is not difficult for people to see from Cook's intensive trip to Southeast Asia that Apple wants to explore more market and investment opportunities in the region.

Chris Miller, an associate professor at Tufts University, said Apple has increased its investment in India and Vietnam, but it is likely to be looking for other partners in Southeast Asia to increase manufacturing and assembly.

The "fruit chain" is gradually growing

"Our supply chain is truly global, so we invest globally. We will continue to look for ways to optimize our supply chain. Cook has said. Southeast Asian countries such as Vietnam, Thailand, and Malaysia will continue to strengthen Apple's business activities in the region with its manufacturing base, business environment, transportation infrastructure investment, and low-cost and high-skilled labor.

Currently, Apple's suppliers assemble iPads, wireless headphones, watches, HomePods, and some semiconductor components in Vietnam. In Apple's 2022 fiscal year supplier list, there are many manufacturers familiar to global shareholders such as Hon Hai Precision, BYD, Goertek, Intel, Lens Technology, Luxshare Precision, Samsung Electronics, LG Display, etc., which have set up factories in Vietnam to supply Apple.

With the gradual deepening of the layout of the local supply chain, the consumer business is also following up. The company launched the Apple Store in Vietnam in May last year, followed by Apple Pay in August. Apple is also recruiting programmers to upgrade the Vietnamese language feature of its voice assistant Siri, as well as Apple Maps' local support for Vietnam.

Liu Xiaoxue, an associate researcher at the Institute of Asia-Pacific and Global Strategy at the Chinese Academy of Social Sciences, said that for Apple, in addition to common advantages such as demographics and labor costs, Vietnam shares a border with China, the "base camp of the fruit chain", and the geographical convenience also makes the supply chain more smoothly.

As for Indonesia's advantages, Liu Xiaoxue pointed out that as the fourth most populous country in the world, Indonesia has not been able to realize its potential for a long time. Most of the multinational manufacturing giants eager to diversify their supply chains have set their sights on Indonesia's neighbors, such as Vietnam and India. But in fact, Indonesia also has its own unique advantages. More than two-thirds of the country's population is of working age, and this demographic dividend is expected to continue into the 30s of the 21st century.

Consumption "big market"

In addition to building a supply chain, Southeast Asia is also a consumer market that Apple is eyeing to consume. As growth slows in developed markets, Southeast Asian audiences with large populations such as Indonesia and Vietnam are becoming increasingly important to Apple.

At present, the global smartphone market is recovering steadily, but Apple seems to be one step behind. On April 15, local time, the latest report released by the research institute IDC showed that Apple's smartphone iPhone shipments in the first quarter of this year were 50.1 million units, down 9.6% from 55.4 million units in the same period last year;

Major General Ding, a senior industrial economic analyst and founder of Nail Technology, believes that the decline in Apple's sales in the first quarter is mainly related to the lack of strength of the iPhone15 series products and the sales are less than expected. Especially in the Chinese market, the overall sales of the iPhone 15 series are relatively flat, and Huawei's strong recovery, OPPO, vivo, Xiaomi, etc. continue to deploy and exert force in the Chinese market, which has also squeezed the overall market share of the iPhone.

In terms of the global market, some analysts said that Apple's global shipments fell significantly in the first quarter, and in China, North America, and Europe. Analysts expect the overall performance of Apple's mobile phone business to be poor in the first half of this year. As for the performance in the third quarter, it mainly depends on the product strength of the iPhone 16 series and whether it can make achievements in the field of artificial intelligence (AI).

Apple said it will continue to invest heavily in Southeast Asia and strive to capture a larger market share in some Southeast Asian countries in the coming years. It is reported that at present, Apple only operates stores in Singapore and Thailand's more developed regions. It is also reported that by 2027, Apple plans to open 15 new or remodeled stores in the Asia-Pacific region.

Malaysia is expected to become the next Southeast Asian country to have an offline Apple Store after Singapore and Thailand. Since the beginning of this year, Apple has been actively increasing its presence in other regions, expanding its distribution and authorized dealer network, especially in Malaysia.

However, some analysts pointed out that the price of Apple's mobile phones is generally higher than $400, and for consumers in Southeast Asian economies, most smartphones are shipped for less than $200, and Apple has struggled to be very competitive in emerging markets because of its pricing.

According to the Boston Consulting Group (BCG), the number of middle-income and wealthy households in economies such as Vietnam, Indonesia, and the Philippines is expected to grow at an annual rate of about 5% by 2030, and these consumer groups will be the "next big market." Although the pricing is on the high side for the vast majority of consumers, some analysts say that if Apple can launch various pricing strategies to attract new users in Southeast Asia, users who switch to iOS will often become staunch "fruit fans".

Beijing Business Daily reporter Zhao Tianshu