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ReutersSAN FRANCISCO (Reuters) – Factories from Brazil and India have not diminished Apple Inc.'s dependence on China, according to supply chain data, pointing out the stakes for the iPhone maker while US President Donald Trump is leading a trade war and promises more tariffs.
The Trump administration levies 15% of taxes on the main products made in China, such as smartwatches and wireless headphones, as well as the iPhone, its biggest seller, from December 15.
Few US companies are as closely tied to Asia's largest economy as Apple. Foxconn's owned factories, Pegatron Corp., Wistron Corp., Wistron Corp. and other Hon Hai Precision Industry Co. companies employ hundreds of thousands of workers to assemble Apple devices.
In recent years, Apple's subcontractors have expanded to other countries. India, for example, had no site of Apple's subcontractors in 2015, but has expanded to three assembly sites by 2019, including a Foxconn owned factory, which plans to make models from the iPhone X device family, reported Reuters last year.
Apple operates operations in India to avoid high import fees on iPhones in one of the fastest growing mobile phone markets on the planet, just as the decision of Apple and Foxconn to open a production site in Brazil in 2011.
But factories outside China are smaller, and in the case of India and Brazil, Apple uses them only to satisfy domestic demand. Apple's outsourcing plants in China have added far more sites than outside: Foxconn alone has grown from 19 sites in 2015 to 29 in 2019 and Pegatron from 8 to 12, according to the data from Apple. Apple has added watches, smart speakers and wireless headsets to its product line.
And beyond the outsourcing factories, the rest of Apple's suppliers – the companies that sell it chips, glass, aluminum housings, cables, circuit boards, and more – have become more concentrated in China. According to the data, among all suppliers, 44.9% were in China in 2015, an increase of 47.6% in 2019.
Reuters analyzed for five years the supply chain data released by Apple. The data includes more than 750 sites each year between 2015 and 2019 for the top 200 suppliers of the California company, based on Apple's expenses. Apple does not disclose the amount it spends with each of them, and the companies on the list may change as different suppliers rank among the top 200 among the thousands of Apple's suppliers.
Reuters sorted the data and calculated the global portion of Apple's supply chain in China. In a few cases each year, Apple did not provide specific address and Reuters excluded that location.
Apple declined to comment on Reuters' analysis. In July, Chief Executive Officer Tim Cook told investors, at the company's quarterly earnings call, that he "would not put a lot of stock in," speculating on how the company would change production because of US tariffs.
"The vast majority of our products are made everywhere," Cook said. "The content is considerable in the United States, and much of Japan to Korea, through China, and the European Union also contributes to a large extent. … I think this will bring the day into the future too. "
Apple faces obstacles to diversify beyond China, where the consolidation of several suppliers allows it to manufacture hundreds of millions of devices a year while retaining only a few days of inventory, which is essential for the free cash flow of Apple investors.
Other phone manufacturers ship far fewer units and have more flexibility. The Google company Alphabet Inc. is transferring its production of Pixel smartphones from China to Vietnam starting this year, building a cheap supply chain in Southeast Asia, reported Wednesday the Nikkei daily newspaper.
But the scale of Apple runs counter to this reality, because few other countries have as large a workforce as China. Plants need highly skilled engineers to design and troubleshoot tools and custom processes. Vietnam, where Apple has been making accessories for years, has a population less than a tenth the size of China.
Even though Apple can manufacture devices in India or Vietnam, the volumes will be small compared to Apple's global needs.
Outside of China, "there are few places in the world that have the infrastructure to produce 600,000 phones a day," said Dave Evans, general manager of the supply chain company. Fictiv of San Francisco.
Until now, Apple has not had to pay any tariffs on major products and has been granted a reprieve last year on many wireless devices. And Cook has cultivated a close relationship with Trump at dinners and private meetings at the White House.
Apple told trade officials that it was generally convinced that tariffs would drive up prices for US consumers, but it did not say whether it was considering transferring rates to customers by raising prices .
For electronic products, the manufacture of the printed circuit board can sometimes determine the country of origin of the product, said George R. Tuttle III, a customs lawyer who worked with electronics companies.
This leaves the opportunity for device manufacturers to manufacture printed circuit boards or other essential components outside of China while assembling devices to avoid tariffs.
Apple has not disclosed such plans. However, Foxconn's Indian unit, which also handles Nokia phones from HMD Global and Xiaomi Corp in addition to Apple, has expanded the possibility of manufacturing printed circuit boards in India, two sources said. sector in Reuters last year.Speech
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