Author丨Lai Zhentao
Editor丨Hu Huiyin
Figure source丨Figure worm
The U.S. stock earnings season has begun, and the performance of the "Big Seven" has attracted much attention. Microsoft, Alphabet, and Meta, which have already handed over their report cards, have outperformed expectations in many indicators, while Tesla, which has performed poorly, has relied on "painting cakes" to turn the tide on Wall Street.
Apple will report earnings on May 2, but Wall Street analysts are already bracing for poor earnings, widely predicting a 5% year-on-year decline in total revenue, while keeping an eye on Apple's "AI ambitions".
Last week, Apple announced a list of suppliers for fiscal year 2023 on its official website, detailing 98% of Apple's direct spending on global product materials, manufacturing and assembly in fiscal year 2023.
In this latest list of "fruit chains", Chinese manufacturers are "in and eight out", which is the first time in nearly three years that Apple has added a net number of Chinese suppliers, after rumors about "fruit chain divestment of China" have been self-defeating. At the same time, the trend of Cook increasing the manufacturing of neighboring countries is also becoming more and more obvious.
Apple is trying to strike a balance between being China-centric and diversifying, but it's clear that Apple's biggest challenge now is not the supply chain, but how to tell a more compelling story about technological innovation. After all, after years of planning, Apple still missed the opportunity to build a car, and when "All in AI" has become the consensus of the global technology circle, Apple, which has entered the market late on the large model, can still win back a city?
Made in China and factories in Southeast Asia, Apple wants them all
In March this year, Apple CEO Tim Cook embarked on a week-long visit to China, not only unveiling the platform of the world's second largest Apple retail store in Shanghai and the largest in Asia, "bumping" Zheng Kai on the Bund, but also interacting with a number of local Chinese companies, including BYD, EPI Precision and Lens Technology, as well as partners such as Papergames and Instant Coffee.
With such an in-depth visit, Cook's intention to show favor to China is obvious. In an interview with the media, he said that Apple and China's supply chain are very harmonious and win-win relations, and there is no more important place for Apple's supply chain than China.
Shortly after his trip to China, Cook visited Asia again, but only in Southeast Asia. From April 15 to April 19, Cook visited Vietnam, Indonesia and Singapore in a whirlwind of two days and one country. Although the stay was short, the "gold content" of each stop was extremely high — in Vietnam, Cook pledged to expand investment in the country, in Indonesia, Cook said he would seriously consider setting up a factory there, and in Singapore, Apple announced that it would invest $250 million to expand its existing campus.
Cook's two journeys, partly intertextual with the "fruit chain" layout.
Apple's reliance on Chinese suppliers is deepening
In the latest "fruit chain" list, Chinese mainland manufacturers are "eight in and four out", four more than in 2022, but suppliers in the United States, Japan and South Korea have been cut.
Zhang Guobin, CEO of Electronic Innovation Network, told the 21st Century Business Herald reporter that among Apple's latest 187 supply chain companies, 92 of them are from China (including Taiwan, China), accounting for more than 50%. Among these 92 Chinese manufacturers, 51 manufacturers from Chinese mainland, accounting for 27.3%, ranked first, while 41 manufacturers from Taiwan, accounting for about 22%, ranked second. It can be seen that suppliers in Chinese mainland and Taiwan are important accessories and processing links for Apple, and "the fruit chain cannot be separated from China".
There is no doubt that the "fruit chain" has been deeply bound to Chinese manufacturers. Zhou Zhang, a well-known science and technology strategy expert and chief consultant of Xinfu Think Tank, analyzed to the 21st Century Business Herald that although Apple has adjusted its supply chain layout globally in recent years, China is still its important single market, and Apple should maintain its production and manufacturing rooted in the Chinese market. At the same time, the strength of China's supply chain is beyond many people's realization, and Apple has set up factories in Mexico, India and other places, and is still highly dependent on Chinese manufacturers to support overseas support.
Apple is also speeding up the pace of setting up factories in Southeast Asia and South Asia
The number of Apple suppliers operating in Vietnam has surged by 40%, the number of suppliers in Thailand has increased by about a third, and Malaysia and Singapore have added two each. The number of suppliers in India has remained stable, but Tata Group is expanding its power through intensive acquisitions of electronics factories such as Wistron and Pegatron, and the number of "Made in India" iPhones has doubled in the past two years.
Lin Wei, director of overseas strategic investment of a manufacturing group, told the 21st Century Business Herald reporter that from the list of suppliers, the status of Chinese enterprises is still important, but it is understandable that Apple will add manufacturing in South Asia and Southeast Asia, Apple's shipment growth has been weak in recent years, but developing countries contain high-growth market potential, and at the same time, local labor is cheap, the government supports local manufacturing, and the appropriate layout of production capacity and support for the supply chain is a specific manifestation of industrial gradient transfer. In addition, geopolitical uncertainties are increasing, and multinational companies such as Apple will consider the fragmentation of supply chains.
It's just that Apple has to pay a higher price for increasing the weight of emerging countries. Zhang Guobin said that Chinese mainland has the world's most mature industrial chain, and more and more Apple products "made in India" and "made in Vietnam" may have a certain impact on its product quality and yield, which in turn will lead to an increase in costs and a decline in profits.
Apple cut orders, and some people in the "fruit chain" are indifferent and some are worried
According to data from market research agency IDC, Apple will become the world's No. 1 smartphone seller in 2023. This is the first time Apple has taken the top spot in the world and the first time since 2010 that Apple has surpassed Samsung.
But soon, Apple's sales crown position was not hot, and it was overtaken by Samsung. IDC report shows that in the first quarter of this year, the overall global smartphone shipments increased by 7.8%, but iPhone shipments fell by 9.6% year-on-year, and the shipments of 50.1 million units fell significantly behind Samsung's 60.1 million units, and Samsung regained the position of the world's largest mobile phone manufacturer from Apple.
Ming-Chi Kuo, an analyst at Tianfeng International Securities, said on his social networking site that according to the latest supply chain survey, Apple has lowered the order volume of key upstream semiconductors, and iPhone shipments in 2024 are estimated to be about 200 million units, which means a 15% annual decrease. Among the world's major mobile phone brands, Apple may have experienced the biggest decline.
The house leak happened to rain overnight, and it was not only the Apple mobile phone that could not be sold. Ming-Chi Kuo also said that according to the survey, Apple has lowered Vision Pro shipments in 2024 to 40-450,000 units, compared with the previous market forecast of 70-800,000 units or more.
Global consumer electronics is back to recover, but Apple is not in the stratosphere and has to endure the test of the losing market. According to many interviewed experts, Apple's inability to sell is largely related to the slowdown in the growth of the Chinese market.
Lin Wei observed that IDC data showed that the domestic smartphone market increased by 6.5% in the first quarter, with Honor and Huawei occupying the top spot, with year-on-year shipments of 13.2% and 110% year-on-year respectively, while Apple's shipments fell 19%, the worst performance since 2020. Further, domestic enterprises have achieved world-class in electronics, new energy vehicles and other segments, and consumers have increased their recognition of domestic products in the context of economic and trade frictions.
According to Shopkeeper Zhou, there are three core reasons for Apple's global sales decline:
The high-end market, represented by Europe and the United States, has also fallen into a whirlpool of declining purchasing power and shrinking demand in recent years;
Second, new products such as Vision Pro launched by Apple belong to the category of high premiums, and it is difficult to form a broad purchasing power;
Three of Apple's "squeezing toothpaste" innovations, each generation of products are basically only fine-tuned and optimized, with a high degree of overlap, and lack of super selling points to attract consumers to change their phones.
Apple's shipments are falling and falling, and for suppliers, cutting orders is expected.
Zhang Guobin told reporters that in Apple's revenue, the mobile phone business contributed 65% of the revenue, if Apple's mobile phone business continues to decline, it will have a great impact on the fruit chain enterprises, first of all, the impact on revenue, which will then lead to capacity contraction, layoffs, etc.
Foxconn behind Hon Hai Precision, has the title of "OEM king", Apple's business accounts for more than half of its revenue, its official website released a summary of March revenue shows that in the first quarter of this year, corporate revenue fell sharply by 9.61% year-on-year, and revenue fell by 20.93% and 12.33% in January and February this year. The life of being the owner of the chain is not easy, and the enterprises that are deeply bound in the industrial chain naturally understand the truth of cold lips and teeth.
However, when the "wolf" of Apple's order cutting has become more and more learned, the "fruit chain" enterprises have slowly learned to diversify their business and put their eggs in different baskets. For example, Apple's recent resurgence of order cutting storms, and the three giants of the "fruit chain" represented by Luxshare Precision, Goertek Acoustics, and Lens Technology have been able to face calmly at least in terms of revenue performance.
According to the Q1 financial report, Lixun Precision achieved a net profit of 2.471 billion yuan, a year-on-year increase of 22.45%, Goertek's net profit was 380 million yuan, a year-on-year increase of 257.5%, and Lens Technology achieved an operating income of 15.498 billion yuan, a year-on-year increase of 57.52%, a new high in the same period of the previous year.
"Fruit chain enterprises are decentralizing their layout, including the implementation of multi-supply strategies, cooperation with domestic mobile phone brands, or entering the field of new energy vehicle support. Lin Wei said.
AI, Apple's "Pivotal Battle"
Apple wants to get out of the quagmire of declining sales, and the core problem is obviously how to continue to tell the story of technological innovation, after all, the public has slowly lost patience with Apple's "squeezing toothpaste".
Capital markets are also making their own judgments. In January this year, Microsoft's market value officially surpassed Apple to become the world's most valuable company. To some extent, this is quite a sign that the king of the global tech giants has changed hands.
Ming-Chi Kuo also warned a few days ago that if Apple fails to launch generative AI services that are better than market expectations this year, Nvidia's market capitalization will likely surpass Apple's.
Shopkeeper Zhou explained to reporters that Apple is a technology company with consumer electronics as the core, but in the future, the positioning of mobile phones will be closer and closer to the terminal of AI, emphasizing the application capabilities of large models and AI on mobile phones. From this point of view, Apple's foundation is inferior to that of technology companies like Microsoft, which are originally engaged in cloud and computer tracks.
"Therefore, my judgment is that Apple is in a shift period of strategic transformation," Zhou said that in the past, Apple continued to expand product categories around electronic consumption, making mobile phones, computers, watches and even cars, but now Apple is most likely transforming into an AI technology company and focusing on the application layer of terminal equipment. It's too early to say that Apple has lost its ability to innovate.
Zhang Guobin bluntly said that general artificial intelligence will bring new business opportunities to consumer electronics, and consumers are willing to pay for new functions, who seizes the opportunity of general artificial intelligence, who will seize the development opportunity in the next 5 or even 10 years. "Cook is well aware that artificial intelligence is an opportunity for Apple's future development, and if it can't grasp it, it will face the danger of being eliminated. ”
Zhang Guobin noted that in the five years from 2016 to 2020, Apple acquired a total of 25 artificial intelligence companies (such as Silk Labs, Turi, Voysis, etc.) around the world, surpassing the global IT outsourcing giant Accenture, and even more than giant companies such as Google, Microsoft and Facebook.
Recently, Apple, which entered the market one step late in the large model, is intensively attracting foreign aid to realize "AI into the iPhone". On April 26, media sources said that Apple is renegotiating with OpenAI to discuss the use of OpenAI's technology in the new iPhone features that will come out this year. Previously, Apple was also discussing with Google that it might obtain authorization for the use of Google's AI robot Gemini.
What needs to be seen is that in the AI mobile phone track, Apple's opponents have long been gearing up. Since the second half of 2023, many mainstream mobile phone manufacturers such as Huawei, Xiaomi, vivo, Samsung, OPPO, and Honor have launched models equipped with AI large models. According to market news, Apple will introduce AI large models in the iPhone 16 and iOS 18 released this year, and run large models on mobile phones instead of in the cloud, which is the main selling point of Apple's large model that has been "holding the pipa and half covering its face".
It's just that Apple, which is belated in AI mobile phones, can finally win back a city?
An interviewed expert told reporters that his friends who were engaged in research and development at Apple's headquarters lamented that it is much more idle than the previous two years, and Apple finally gave up building a car because it missed the opportunity to invest too much, but in fact, it is also difficult to turn to AI. "Apple is not very optimistic unless it can prove itself with disruptive new categories. ”
Of course, being a late striker is a familiar storyline for Apple. "Apple never be the first person to eat crabs, for example, it is not the first company to launch 5G mobile phones, nor is it the first company to launch VR/AR, Apple will always choose a certain market to enter after an early outbreak period. Zhang Guobin said that although Apple entered the field of artificial intelligence late, it may not lag behind in future development with strong R&D funds and huge data accumulation. In addition, Apple's strong focus on user experience, its ecosystem, and its deeply rooted brand are the cornerstones of its success in the past, today, and beyond.
In the hardware era of smart phones, Apple has successfully broken through to become a technology company that defines products, but as smart terminals enter the AI era, can Apple still replicate the scripts of the past?
SFC
Editor: Jin Shan, Intern: Su Jinyi
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