Behind The Scenes: China Holds Sway in Apple's Supply Chain As India Strives To Push Forward

Cupertino, California-based Apple's effort to diversify its global supply chain and move manufacturing out of China, may not be meeting its end-goal.

An analysis of Apple's updated supplier list suggests that while the American tech giant is expanding production in Southeast Asia and India, it is also strengthening its ties with China.

Apple publishes an official list of suppliers for all its products almost every year. The latest edition covers 187 suppliers and represents 98 per cent of Apple’s direct spending on materials, manufacturing, and assembly for fiscal 2023.

Since 2020, Chinese suppliers have consistently dominated Apple's supplier base, increasing from 48 in 2022 to 52 in 2023. Among them are major players like Compal, GoerTek, and Hon Hai Precision Industry Co., better known under its brand name Foxconn. 

Indeed, according to the supplier list, Apple added eight new Chinese suppliers while removing four contractors on the mainland. This marks the first instance since 2021 that the tech giant has added more suppliers from the country than it has removed.

The newly added mainland suppliers include Baoji Titanium Industry, an alloy manufacturer that counts aircraft makers like Boeing as clients, San’an Optoelectronics, a display tech company, Zhejiang Tony Electronic, which specialises in semiconductor materials, and Jiuquan Iron & Steel.

Taiwanese suppliers remained the second-largest group within Apple's supply chain, with the U.S., Japan, and South Korea following suit.

That being said, Apple has also accelerated its supply chain shift to Southeast Asia, including India, with Tata Electronics making its debut on the latest supplier list.

Tata Electronics, a greenfield venture of Tata Sons, specializes in producing smartphone enclosures, a high precision component which serve as the structural frame for assembling various components and sub-assemblies.

With Tata's acquisition of Taiwan-based Wistron's iPhone assembly plant near Bengaluru last year, its presence in the supply chain is anticipated to expand.

Wistron is one of the three major contract manufacturers engaged by Apple to assemble smartphones and make components in India, the other two being Pegatron Corp and Foxconn. 

The Devil In The Details

As the cliché goes — the devil lies in the fineprint, Apple's supplier list is proving to be no exception. This growing footprint in India and Southeast Asia does not automatically mean a decrease in reliance on China.

The level of dependence on China can be gauged by two main factors: the number of manufacturing or development facilities based in China and the presence of Chinese-owned suppliers operating in other countries.

Thus, while a total of 157 contractors conducted manufacturing in mainland China, up from 151 the previous year, the number of manufacturing or development facilities in China -- including those owned by domestic and foreign companies -- rose by 10 to reach 286.

Similarly, around 37 per cent of the 35 suppliers in Vietnam hail from China and Hong Kong, among them AirPods assemblers Luxshare and Goertek, as well as iPad assembler BYD.

The 14 suppliers in India are primarily comprised of Chinese companies, including Zhen Ding Technology Holding Limited and Lingyi in Tamil Nadu, Shenzhen YUTO Packaging Technology Company in Bangalore, and Sunwoda Electronic Company in Noida, Uttar Pradesh. Additionally, U.S.-based suppliers like Flex and Jabil are also part of the group.

What Lies Ahead

For years, China served as the bedrock for Apple's production. However, the familiar Apple mantra of "designed in California, assembled in China" has encountered unprecedented challenges amid the COVID-19 pandemic and ongoing U.S.-China tensions.

This resulting uncertainty put pressure on the tech industry, including Apple, to diversify its manufacturing beyond China.

Yet, despite being a significant market for electronics manufacturers, India has yet to witness a surge in investment. While device assemblers are increasing their production footprint in the country, many component and electronics module makers remain in a wait-and-see mode.

The reality is that shifting supply chains is a complex process that demands time. Apple, like others, needs to navigate a delicate balance between geopolitical realities and commercial interests.

When Apple CEO Tim Cook says, "There's no supply chain in the world that's more critical to us than China," he candidly acknowledged what few wish to admit.