Ranks of Apple suppliers surge in mainland

By Xie Jun Source: Global Times Published: 2020/12/9 20:23:40

Ranks of Apple suppliers rise amid US crackdown

People shop at an Apple store in Shanghai on October 23 after iPhone 12 was newly launched. Photo: cnsphoto

The number of Chinese suppliers for Apple surged from almost none 10 years ago to dozens in the present day, driven by the rapid development of China's mobile phone terminal market, and this trend can't be reversed even by a US crackdown, industry observers said. 

They made the comments as Chinese acoustic components maker Goertek Inc was revealed to be the supplier of Apple's wireless headphone AirPods Max, which the US mobile phone giant just launched on Tuesday. 

An employee in the investor relations department of Goertek declined to discuss the matter, citing a confidentiality agreement. Some media reports, however, said that certain people close to the company essentially confirmed the news. 

Sun Yanbiao, head of Shenzhen-based research firm N1mobile, confirmed to the Global Times that Goertek is the sole supplier for AirPods Max. The company also supplied about 40 percent of Apple's AirPods and AirPods Pro, with the rest being supplied by Luxshare Precision Industry Co, a connectors manufacturer based in South China's Guangdong Province. 

Goertek's shares rose 7.72 percent to 40.03 yuan ($6.13) on Wednesday.  

Information provided by telecoms expert Xiang Ligang to the Global Times on Wednesday showed that there are about 40 Chinese suppliers for Apple's iPhone 12, including the Shenzhen-based optic and photoelectric products manufacturer Ofilm Group Co, which supplies Apple with camera modules and BYD, which provides batteries and other parts. 

Sun told the Global Times that Apple has about 100 Chinese suppliers, including some that have outsourcing contracts with Apple's direct suppliers in the country. 

The Nikkei Asian Review reported in March 2019 that Chinese mainland suppliers for Apple had overtaken those from the US and Japan, though they still lagged behind suppliers from the island of Taiwan. 

According to Xiang, the number of Chinese suppliers for Apple has surged in recent years, from "almost none" 10 years ago. 

"The expansion was particularly fast in the past five years, when the rapid rise of mobile phone brands, not only the likes of Xiaomi and Vivo but even copycat cellphones, drove up demand for mobile phone parts and raw materials," Xiang said. 

The trend gave mainland suppliers an advantage that can't be easily replaced although some other countries may have strengths like cutting-edge technologies or lower costs, experts said. 

"International giants like Apple would not consider a supplier if its products had not been tested by the market and used by a large number of consumers. This is something Chinese suppliers can do, as they have accumulated enough talent, technologies and production capabilities by supplying domestic brands over the years," Xiang noted. 

Some of China's suppliers have moved production to neighboring countries, he said, but it's unlikely that those other countries can develop supply chains themselves for international mobile phone giants, as they lack China's large market and fast economic development to nurture phone parts markers, he noted. 

"Besides, Apple should want to order components from mainland companies as a way to beat down prices requested by overseas suppliers," Xiang commented, adding that Apple still imports most of its core mobile phone parts like Central Processing Unit from overseas countries. 

Sun noted that Apple has "grown familiar" with some mainland suppliers and would find it inconvenient to replace them. "For example, Goertek became a supplier for Apple around 2018 and gradually saw orders grow. Apple surely would prefer the company to firms it does not know much about," Sun said. 

Xiang stressed that the rise of Chinese suppliers is an inevitable trend that can't be reversed by external obstructions like US sanctions. Earlier, Apple supplier Foxconn said it would add capacity outside of China as relations became tense between the world's two largest economies amid a trade war. 

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