/Apple%20Watch%20on%20Wrist.jpg)
Last year, Apple (AAPL) listed 188 companies worldwide that provided components and services to assemble its iPhones, MacBooks, and other devices. Of all those companies in Apple’s supply chain, about 80% of them are from China. However, as the COVID-19 pandemic emerged and U.S. and Chinese tensions escalated in recent years, other countries in Asia, such as India and Vietnam, have emerged as popular new hubs for Apple suppliers and producers.
Due to strengthening ties with the U.S. and a cheaper workforce, India and Vietnam have benefited from Apple’s move to diversify their operations away from China. Many companies operating in China started looking for new manufacturing locations over a decade ago when China’s rapid growth began to push wages higher. In 2012, there were no Apple suppliers in India. However, the country now has 14 suppliers, and Apple’s new iPhone 15 will be the first model to ship directly from India just weeks after leaving factories in China.
Six of Apple’s top 10 suppliers have factories in India and Vietnam. Over the past ten years, Vietnam has seen a fourfold increase in companies assembling Apple products. Vietnam’s electronics workforce reached 1.3 million in 2022, a quadrupling since 2013. Also, the Indian Cellular and Electronics Association estimates that the electronics sector has created up to a million direct and indirect jobs in India since 2018. India now manufactures 7% of all iPhones, tripling production in the last fiscal year. Indian electronics exports have quadrupled since 2018 to $24 billion last year.
Apple’s diversification of its production and supply lines across several countries raises the risk of shipping delays and inflated costs. India and Vietnam lag behind China regarding infrastructure, labor availability, and general supply chain expertise. Taiwanese assemblers that dominate Apple’s supply chain still do most of their work in giant complexes in China, but they are also beginning to diversify their operations. In Vietnam, Apple lists 25 suppliers in the country, although more than 300 subcontractors that service those 25 suppliers have also opened up shop there. Vietnam’s electronics industry constituted 32% of Vietnam’s exports last year, nearly twice as much as ten years ago.
The movement by Apple to move production away from China into other Asian countries is not without risks. Essential services, such as power and water, are less reliable in India and Vietnam than in China. Other Apple suppliers, including Dell Technologies, HP Inc., and Sony Group, are also reducing their presence in China. Also, moving away from China’s already established supply chains risks the chances of disrupting supply chains and boosting supply and shipping costs. Singapore Sovereign Wealth Fund GIC Pte said, “The challenge coming from that is that you will fragment what are already very efficient supply chains. It will increase costs and therefore continue to push up inflation over time.”
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
