Apple Shifting Manufacturing and Supply Chain Away From China
October 23, 2022 at 12:49 p.m.
Economic and political forces are changing the way Apple manufactures your iPhone. As geopolitical and global economic changes unfold, Apple is partly bending to domestic political pressure but also transforming its supply chain for diversity.
Manufacturing centered in one nation is problematic for any enterprise. The recent pandemic slowed production and resulted in a global shortage of chips because China was practically the sole manufacturer. Although Apple was least affected by the production shortfall, its leaders saw the necessity of supply chain diversification.
The Biden administration is cracking down on Chinese chip manufacturing by banning exports of US chip-making technology. The move makes it much more difficult for China to produce silicon at 14 nanometers (or below). Washington also restricted US technology to create 128-layer memory chips used in the iPhone, iPad, Mac, and virtually every Apple product.
Apple has gradually shifted some manufacturing to India and Vietnam. The company formerly produced older iPhone models in India but has now moved iPhone 14 production there. Indian production currently accounts for only 5% of global iPhone supply; however, JPMorgan analysts predict 25% of Apple’s smartphones will be manufactured there by 2025.
Similarly, Vietnam is also taking on manufacturing for Apple. The country is already home to iPad and AirPod production, with Apple considering moving MacBook and Apple Watch manufacturing to the Southeast Asian nation.
The Biden administration’s new restrictions on US technology exports to China only benefit other emerging industrial nations. India seems to have the most to gain. The nation has proven its technological prowess with hypersonic missiles, a $25 million Mars mission, and the world’s first DNA vaccine. The new Digital India RISC-V Microprocessor Program will deliver world-class chips by 2023 without the assistance of US technology.
Political tensions between Washington and Beijing fuel much of Apple’s supply-chain transition. The company recently paused plans to use memory chips produced by state-funded Yangtze Memory Technologies Co, out of uncertainty. As the Biden administration puts further pressure on Beijing, Apple’s expansion of Chinese manufacturing and component acquisition remains questionable. Furthermore, in a turbulent world, the necessity of supply-chain diversity will see Apple shifting production and component purchases to other nations.