Apple relies heavily on Chinese Mainland to produce products, but this has recently become a problem. The epidemic in Shanghai in April 2022 and Zhengzhou in October 2022 seriously affected the production capacity of Apple products, and even fell into a "chain breaking" crisis. In order to reduce its dependence on Chinese Mainland, Apple is actively promoting supplier diversification, and the industry is also constantly hearing relevant news.

The "clues" to accelerate supply chain transfer

According to the latest survey results of Guo Mingxuan, an analyst of Tianfeng Securities and an Apple analyst, Advanced Optoelectronics, a Taiwan, China based manufacturer, has become a new lens supplier for Apple's iPad. The cooperation with Daliguang and the shipment of camera modules (CCM) are driving new growth in the medium and long term. At present, Advanced Light only supplies Mac lenses for Apple. It is expected that the company will start shipping iPad lenses from the second half of this year.

Guo Mingxuan believes that in the medium and long term, Advanced Light may follow the growth model of Sunyu Optics in the Apple lens supply chain, gradually increase the supply proportion from the acquisition of iPad orders, and finally obtain iPhone orders.

Filipe Esp ó sito, a Brazilian science and technology reporter from 9to5Mac, a foreign science and technology website, wrote that in the long run, Apple intends to reduce its dependence on the supply chain of Chinese Mainland by increasing its orders for the supply chain in Taiwan, China, China, and gradually, Apple is transferring its supply chain production lines to other countries/regions outside Chinese Mainland.

In August 2022, Japanese media reported that Apple was negotiating to produce Apple Watch and MacBook in Vietnam for the first time. Next, market news pointed out that Apple had designated Foxconn, its largest supplier, to start producing MacBooks in Vietnam as early as around May next year.

In addition to Vietnam, India, with its demographic dividend and larger market size, seems to be a good option. In October last year, people familiar with the matter said that Apple asked its suppliers to transfer some of the production of AirPods and Beats earphones to India, which was the first time Apple made such a request. In addition, it was recently reported that the Indian subsidiary of Jabil Inc. (Jabil) has begun to transport the plastic shells of AirPods to Chinese Mainland and Vietnam, which are the main assembly places of Apple wireless headphones. Neil Shah, Vice President of Counterpoint Research, said: "Manufacturing the shell is usually the first step in the overall production of AirPods. Now Apple has obtained the preliminary approval of some suppliers, including Lucent Precision, and they are clearly establishing a supply chain for the final product."

Previously, industry insiders commented that "after the transfer of MacBook production, all of Apple's flagship products have basically added a production site outside Chinese Mainland, producing iPhones and AirPods in India, and Macbooks, Apple Watch and iPads in Vietnam. What Apple wants now is that at least some of its products are produced in other countries.

Apple's "disengagement" from Chinese Mainland is still unknown

In fiscal year 2020, 96 Chinese suppliers (including 47 from Taiwan, China) were listed in the list of suppliers released by Apple, accounting for 48% of the total suppliers. As of fiscal year 2021, the number of suppliers in Chinese Mainland in this list exceeded 50. In addition, according to statistics, more than 95% of the iPhones, AirPods, Macs and iPads are made in Chinese Mainland, and Apple also earns about a fifth of its revenue from Chinese Mainland - $74 billion last year. This shows the importance of Chinese Mainland to Apple.

Kevin O'Marah, a supply chain researcher, wrote an article in the Financial Times to analyze in detail how Apple relies on Chinese Mainland, and realized the standardization of supply chains that are difficult to replace in the Chinese Mainland market.

O 'Marah learned that Apple did not really "outsource" its production to Chinese Mainland as is generally understood. On the contrary, he realized that Apple was starting to build a supply and manufacturing business that was so complex, deep and costly that the fate of the company had been linked to Chinese Mainland in a way that could not be easily removed.

In the past 15 years, Apple has been sending its top product designers and manufacturing design engineers to Chinese Mainland and arranging them in suppliers' factories for months at a time. Apple also spent billions of dollars to buy customized machines to build its equipment and develop niche expertise that its competitors did not even know.

Apple is currently under great pressure from investors and American politicians to "decouple" from China and accelerate the implementation of diversification strategy. Interviews with 25 supply chain experts (including 9 former Apple executives and engineers) show that the iPhone manufacturer has almost no viable way out, nor in the short term.

From another perspective, can other Asian countries that Apple currently "likes" really shoulder this heavy responsibility? Taking India as an example, its advantages include the growing geopolitical tensions between western countries and Chinese Mainland. However, experts warn that India, with a population of 1.4 billion, still has a long way to go to improve the lasting benefits of its sluggish manufacturing industry. Amitendu Palit, an economist in international trade and investment at the National University of Singapore, said, "The Modi government needs to prove that India is a cheaper and easier place to do business, rather than simply relying on political or security factors to attract companies."

Filipe Esp ó sito also believed that Apple could not cut off its complete dependence on China.