Apple suppliers deny shifting supply chains out of China
Published: Oct 12, 2020 07:33 PM

Workers are seen at a workshop in Longhua science and technology park of Foxconn Technology Group in Shenzhen, south China's Guangdong Province, Feb 22, 2019. (Xinhua/Mao Siqian)

China will retain its important role in Apple's supply chains despite rumors in foreign media claiming that the suppliers of the US high-tech company are shifting production out of China amid mounting global uncertainties.

Some Western news reports claiming that companies like Apple plan to deploy backup supply chains outside China. Suppliers such as Taiwan Semiconductor Manufacturing Co (TSMC), Foxconn and Pegatron have all come under pressure to move 15-30 percent of their production out of China and into other Asian countries such as Vietnam and India, the reports alleged.

In response to the reports, the suppliers said that they still have a significant attachment to China and their business focus on China won't change.

TSMC, the world's largest contract chipmaker and a major supplier of Apple, said in an email to the Global Times on Monday that the company's operations and investment plans in the Chinese mainland remain unchanged.

Foxconn told the Global Times that it "will not comment on market rumors."

Technology companies have been under growing pressure from the US government that aims to weaken China's leading status in global supply chains, which are now a driving force for global economic stability as the country recovers from the fallout of the coronavirus pandemic.

Recently, US government officials have put pressure on Taiwan suppliers and pushed them to move production capacity out of the Chinese mainland, according to the Japan-based Nikkei. 

Against the backdrop of mounting pressure by the US, Apple plans to move one-fifth of its production capacity from China to India, Indian news site reported. 

Although Foxconn did not respond to the reports, the news did not come as a surprise to some companies that have ties with Apple, as some had already made plans to balance the risks caused by mounting global uncertainties, such as deteriorating China-US relations.

To avoid potential US tariffs, some companies have started a plan called "China plus one," which means that in addition to China, they will also diversify their business into another country, a Global Times source at a company based in South China's Guangdong Province, said.

However, given that many of these companies' clients are based in China, which has a relatively integrated industry chain, their plans haven't made much progress, the source said.

The source, a manager of the company, which was part of Apple's supply chain, said that "our factory's location mostly depends on where our clients are. So far, we are not shifting to anywhere, as our major clients are based in China."

"But if in the future, there are political factors such as more US tariffs, we will have to develop new factories in other places to balance this out," she said.

Liang Zhenpeng, a senior industry analyst, told the Global Times that it's possible that Apple will move some of its supply chains from China to other Asian countries where labor costs are lower.

However, production of key components with high technology involved — such as chipmaking — will still be completed in China, thanks to the advanced production lines and trained personnel, Liang said.

Apple's iPhone sales in China jumped 225 percent in the second quarter as the country made a speedy recovery from the fallout of the pandemic.

Getting closer to China, the largest mobile consumption market, where Apple accounted for over 18 percent of the wireless headphone market, is also an important reason for keeping its supply chain closer, experts said.