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Apple Continues To Depend On China Production Amidst Impending Trump Tariffs


08/30/2019


Apple Continues To Depend On China Production Amidst Impending Trump Tariffs
United States tech giant Apple Inc. is still heavily dependent on Chinese manufacturing according to a new report even as the company is set to be hit by the new tariffs imposed on China by President Donald Trump which also includes impending tariffs that would impact its iPhones and iPads starting December. 
 
Just like many other American manufacturers, Apple also is dependent on contract manufacturers in China to produce large quantities of products. Apple’s flagship devices like iPhone, iPad, Apple Watch and MacBook to accessories and peripherals all have the "Assembled in China" as far as Apple is concerned.
 
But Apple is set to be put in an economically uncomfortable situation because its the high dependence on Chinese production and with the looming Trump’s tariffs. Starting September, US tariffs are set to be imposed on AirPods, Apple Watch and HomePod, while iPhone and iPad will be slapped levies from December 15. Apple now has little choice of alternatives to avoid the tariffs and their impact.
 
In order to cushion the cost of Trump's tariffs Apple could leverage its dominant position in the market and holdings, suggest some analysts. Or the company can choose to pass on the impact of the tariffs on to the customers. There are also rumors that the company is also trying to establish relationships with suppliers outside of China for its manufacturing needs such as creating manufacturing operational bases in Brazil, India and Vietnam
 
But based on an analysis by news agency Reuters from publicly available supplier data, it seems that there is no intention of the company to bring in any changes in its current business strategy. 
 
Annual reports from the main suppliers of Apple, over the last five years, extensive investments to expand operations in China so as to meet the growing needs of Apple have been made by Foxconn, Pegatron and Wistron. There were 19 production units of Foxconn in China in 2015 which was increased to 29 in 2019, claims the analysis of Reuters. And over the same period, the number of units of Pegatron increased from eight to 12.
 
The report also says that a larger slice of smaller essential items and raw materials are supplied by Chinese suppliers which include the likes of aluminum casings, cables, chips, circuit boards, glass, etc. Supply of those items to Apple from China grew from 44.9 per cent in 2015 to 47.6 per cent in 2019. 
 
The Reuters report reached the conclusions from analysis of data of Apple for five years about the company’s locations owned and operated by its top 200 suppliers in terms of spending.
 
The report also noted that expenses for development of production facilities outside of China are being made by a number of the manufacturing partners of Apple. A a major device assembly plant was opened in Brazil in 2011 by Foxconn, the first major Apple supplier to do so. The company has also recently started a facility in India. And an assortment of iPhone models in India is also produced by Wistron.
 
"There's been a lot of speculation around the topic of different moves, but I wouldn't put a lot of stock in that if I were you," Cook said during Apple's third quarter earnings conference call. "The way that I view this is that the vast majority of our products are kind of made everywhere. There's a significant level of content from the United States, and a lot from Japan to Korea to China, and the European Union also contributes a fair amount. That's the nature of a global business and I think that largely that will carry the day, and in the future as well."
 
(Source:www.appleinsider.com)