Apple has more suppliers in mainland China and Hong Kong than in the US, a recent Apple suppliers list showed. The number of mainland Chinese and Hong Kong-based suppliers has tripled since 2012 to 41, currently accounts for over 20 per cent of the top 200 suppliers on the list.
Meanwhile, the number of suppliers in the US declined by more than 32 per cent in the same period. Currently, there are only 37 US-based suppliers in the top 200 supplier list.
An analysis from Nikkei Asian Review shows that mainland China and Hong Kong suppliers combined are currently the second-largest Apple component makers. The first position is acquired by Taiwan, which has 46 suppliers. Japan secures the third position with 38 suppliers on the top 200 list.
According to Apple’s official announcement, the top 200 list represents 98 per cent of procurement expenditures for materials, manufacturing and assembly of Apple products worldwide in 2018.
The rapid growth of Apple Chinese suppliers
China becomes the most significant production base for the iPhone maker. The number of Apple production sites located in China has increased over seven per cent to 380 factories compared to the previous year. It is nearly half of the total Apple supply chain sites.
One of the Chinese-based factories Luxshare Precision Industry became a key AirPods assembler since 2017. It marked the end of Taiwanese-based manufacturers domination as the final assembler for Apple products.
The supply chain of Apple is also diversified further to India and Southeast Asian countries. Suppliers for Apple operated eight manufacturing sites in India in 2018: three iPhone assemblers and five other component factories. An AirPods and audio components supplier GoerTek is eyeing Vietnam as its production base in the near future. Luxshare, on the other hand, has already opened a facility in northern Vietnam.
Apple’s Chinese suppliers beat the US counterpart
Upon request of US President Donald Trump, Apple has also increased the number of its component suppliers in its home country by 14 per cent to 65 facilities last year. Top suppliers from the US include Qorvo, Skyworks Solutions, Intel, 3M and Corning. According to research by Nikkei, those companies produce crucial semiconductor technologies, optical parts and advanced materials.
However, the number of domestic production facilities is still a one-fifth decline compared to 2012. This is an opposite trend compared to the significant growth in Asian countries.
Nevertheless, the tech giant’s contribution to the US economy grew 10 per cent last year. According to the company official statement, Apple spent $60bn for 9,000 component suppliers from the US in 2018. It also supported more than 450,000 jobs in the country.
Apple suppliers in China: Trade war threat
Currently, Apple products are not included in the tariff list from Trump administration. But the US president stated that iPhone and other Apple products could be hit by the next round of tariffs.
Apple CEO Tim Cook has warned that tariffs on Apple products would harm the tech company. In a letter to Apple shareholders published last January, Cook has announced a reduced revenue target due to trade war impact. “We believe the economic environment in China has been further impacted by rising trade tensions with the United States,” Cook wrote.
In the fiscal 2019 first quarter (which ended December 29, 2018) the company posted quarterly revenue of $84.3bn – a decline of 5 percent from the year-ago quarter. In contrast to Q1 2018’s record $88.3 billion in revenues, it is the first year-over-year holiday sales decline since 2001.
Criticism is also coming from the US Chamber of Commerce. They say that tariffs are the wrong approach to address unfair trade practices. New research predicts that the trade war can cost the US economy up to $1tn. The ICT sector is said to be hit the hardest. Export goods are expected to be 20 per cent lower than they were under pre-trade war conditions.