Recently, as the iPhone's market share in China continues to decline, Apple CEO Tim Cook urgently adjusts his strategy to vigorously maintain relationships with Chinese suppliers. This is in stark contrast to Apple's attitude in the past, so it is widely believed that Apple wants to avoid a repeat of the OFILM incident. However, it remains to be seen whether Apple's move will actually turn the tide and rebuild China's supply chain strengths.
The decline in iPhone sales in China has prompted Apple to adjust its China strategy
According to public data, in the first quarter of 2022, year-on-year iPhone shipments in the Chinese market fell sharply, falling by as much as 19%. This is not only the worst quarter for the iPhone in the Chinese market since the outbreak of the new crown epidemic, but also shows that Apple is gradually losing its dominant position in the Chinese market.
Faced with a sharp decline in iPhone sales in China, Apple CEO Tim Cook chose to take the initiative to adjust his strategy and actively maintain relationships with Chinese suppliers. For example, Apple added eight Chinese suppliers to its supplier list in the new quarter, including three companies that had previously been removed from Apple's list.
At the same time, Cook has repeatedly publicly emphasized the strategic position of the Chinese market and the importance of Chinese companies to Apple's global supply chain.
Cook's move is clearly aimed at retaining the Chinese market, which has directly led to the negative impact of global iPhone sales. The hasty stabilization of the Chinese market also exposed that Apple is still overly dependent on Chinese production and sales. If the Chinese market shrinks further in the future, it will seriously affect Apple's overall performance.
The shadow of the OFILM incident has not dissipated, and the development of Apple's supply chain in China is limited
Cook's rapid adjustment strategy was interpreted by the outside world as Apple's intention to avoid the recurrence of the OFILM incident. At the end of 2021, OFILM was suddenly removed from the supplier list by Apple, which caused an uproar in the industry. The reason is that OFILM is an important supplier of optical components to Apple, and the two sides have cooperated for more than 10 years and are considered to have a solid cooperative relationship.
After the OFILM incident, "de-sinicization of the supply chain" has become the focus of Wall Street investors. Apple is also actively cultivating suppliers in emerging markets such as India, in an attempt to break its dependence on Chinese supply chains. As a result, there are fears that Apple will further cut the share of Chinese suppliers and accelerate the hollowing out of its supply chain in China.
Although Cook's move is seen as a gesture of goodwill to Chinese suppliers, the shadow of the OFILM incident has not yet dissipated. After all, even the three suppliers who returned to the list this time were removed from the list by Apple last year. This shows that there are structural problems between these Chinese companies and Apple, and the foundation for cooperation is not solid.
India's production capacity increase may once again rewrite Apple's supply chain pattern
While on the surface, Cook's move will help stabilize China's supply chain, in the long run, India's ramp-up could once again rewrite Apple's supply chain in China.
Apple has been working to build a regional supply chain cluster in India, and wants India to become the second largest producer of iPhones after China. With the continuous increase in the production capacity of Indian factories and the high importance attached to the Indian market, Apple is likely to further increase the proportion of Indian suppliers in the future and continue to promote the global layout of the supply chain.
At the same time, China's mobile phone market is slowing down, and consumers are becoming less reliant on iPhones. This will reduce Apple's strategic dependence on the Chinese market. Once the Indian market matures, Apple is likely to adjust its supply chain allocation again and cut the share of Chinese suppliers.
Looking ahead, Chinese suppliers need to improve their technical capabilities to win the right to speak
Although Cook has recently actively maintained relations with Chinese suppliers by adjusting the supplier list, fundamentally, Apple's dependence on the Chinese market and supply chain is still declining, and the OFILM incident is likely to happen again in the future.
Therefore, Chinese suppliers must recognize the situation, continue to improve their technical strength and R&D capabilities, and not rely too much on Apple's single order. Only in this way can Chinese suppliers gain a greater say in Apple's industrial chain and avoid falling victim to supply chain adjustments. At the same time, it is imperative to further expand downstream application fields and realize technological and industrial upgrading.
Cook's initiative to show favor to Chinese suppliers does not mean that the OFILM incident will not be repeated. Chinese companies must actively respond to the adjustment of Apple's global supply chain strategy to reverse the passive situation. No matter how Apple's supply chain changes, improving its independent innovation capability is the only way for Chinese companies.
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