Suppliers for the tech giant, Apple Inc. AAPL, have collectively spent a whopping $16 billion since 2018 to diminish their manufacturing dependence on China, as per a recent study.
What Happened: A research report by TD Cowen revealed that ongoing U.S. and China trade conflicts and production delays, fuelled by China’s COVID-19 measures and energy supply issues, have triggered this diversification, reported AppleInsider.
The report suggests Apple’s considerable revenue shortfall due to complications within China has also influenced this shift.
See Also: Apple Vision Pro Could Hit Shelves In Late January Or Early February, Says Ming-Chi Kuo
“Over the last four years since the start of the pandemic, we estimate Apple’s revenues have been impacted by over $30 billion,” says TD Cowen’s note, referring to hurdles such as component supply, labor availability, and government-imposed restrictions on movement.
Apple and its 188 crucial suppliers are pouring resources into reshoring their operations, a trend predicted to persist. Since 2018, around “$16B for diversifying production assets away from China to India, Mexico, the U.S., and Vietnam,” according to the report.
Why It Matters: Despite the diversification efforts, China remains the mainstay of iPhone production. However, Apple and its associate suppliers have reportedly planned to assemble over 50 million iPhones annually in India within two to three years.
This suggests that Apple is banking on India to become a significant contributor to global iPhone production.
Meanwhile, Chinese restrictions on Apple devices have expanded to include state-backed firms and more government departments across multiple Chinese provinces. This development signals a potential sales decline for Apple in China, further underscoring the urgency of its diversification strategy.
Moreover, previously it was reported that Apple intends to consolidate ties with China-based suppliers, exemplified by its Chinese partner Luxshare Precision Industry Co.’s acquisition of an iPhone assembly site from Pegatron Corp.
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This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.
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