End of Apple’s golden era won’t halt Chinese suppliers’ innovation

By Li Xuanmin Source:Global Times Published: 2019/4/18 16:48:40

Customers visit Apple Inc's store in Hong Kong on September 21, when the iPhone 5 debuted. Photo: CFP

With an agreement between China and the US to end the year-long tariff war seemingly within reach, Apple - which has contracted with a growing number of Chinese suppliers and forged deeper ties with China - can finally take a breath.

The US tech firm is growing more reliant on the Chinese market. But that is not primarily due to China's long-held reputation as the "world's factory" and the country's inexpensive land and labor supply. 

China is no longer just the world's factory. 

Chinese manufactures are rising rapidly in tech capacity, which has helped them play a growing and significant role in Apple's supply chain. Even the lingering China-US trade war has barely impacted Apple's quest for high-quality manufacturing in China. 

According to analysts' calculations based on Apple's 2019 Supplier Responsibility report, the number of Chinese suppliers for Apple has surpassed that of US and Japanese companies for the first time in 2019. 

More than 40 Chinese companies were included among Apple's top 200 suppliers, which received about 96 to 98 percent of its procurement orders, compared with about 34 Chinese firms last year and 10 Chinese suppliers back in 2012. 

Among the major categories deemed the most valuable consumer electronic components, Chinese suppliers are "outpacing" Japanese, US and European rivals, with breakthroughs in gaining orders in industries such as display panels and camera modules in recent years, which have traditionally been dominated by foreign players.

For example, in terms of display panels, BOE Technology Group entered Apple's supplier list last year, filling a gap in Chinese players' supply of display panels for Apple - the most expensive electronic parts for smartphones, tablets and notebooks.  

BOE currently provides panels for MacBooks, but industry insiders expect that as research and development moves forward, the firm will be able to supply panels for iPhones, Apple's best-selling product line, in the next few years, ramping up more pressure on South Korean and Japanese peers such as LG and Japan Display Inc.

Meanwhile, Chinese firms have also upgraded to provide a complete set of services for clients. 

Precision component-maker Luxshare Precision Industry Co, also an Apple supplier, started as a producer of connectors, a low value-added product. But the Guangdong-based company now has become one of the major contributors in setting global standard for Type-C cable and connector specification. 

It is also able to provide well-rounded services for clients from design, manufacturing to intelligent and internet solutions.

To be fair, Chinese firms' irreplaceable advantages in services and innovation, some of which have led the industry, have made Apple more reliant on them. But on the other hand, cooperating with Apple, which is known for its strict standards in selecting world-class suppliers, has inspired Chinese companies to perform better and expand at a remarkable speed.

Some of the industry leaders that supply Apple have also been providing components for homegrown and other foreign brands at the same time. 

Apple is now facing a tough time as its sales have plunged globally. But the end of Apple's "golden era" won't halt Chinese suppliers' ability to innovate. Their rising tech ability will only help them win more business, which could be more than enough to make up for Apple's sliding shares.


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