In the fall, Apple will manufacture some of its flagship iPhones outside of China for the first time, a small but significant change for a company that has built one of the world’s most sophisticated supply chains with help. Chinese authorities. But the development of the iPhone 14, which should be unveiled on Wednesday, shows how complicated it will be for Apple to truly turn away from China.
Posted at 4:00 p.m.
More than ever, Apple’s Chinese employees and suppliers provided intricate work and sophisticated components for the 15e year of its flagship device, including aspects of the design, speakers and batteries, according to four people familiar with the new operations. As a result, the iPhone has gone from a product designed in California and made in China to one that is a creation of both countries.
The essential work provided by China reflects the progress the country has made over the past decade and represents a new level of involvement of Chinese engineers in iPhone development. China first lured the companies to its factories with legions of cheap workers and unparalleled production capacity, but the country’s engineers and suppliers have moved up the supply chain to claim a bigger share of the industry. money that American companies spend to create high-tech gadgets.
The increased responsibilities China has taken on for the iPhone could challenge Apple’s efforts to reduce its reliance on the country, a goal that has become increasingly urgent amid growing geopolitical tensions. about Taiwan and simmering concerns in Washington about China’s rise as a technological competitor.
Chinese companies with a presence in India will still play a key role in Apple’s plan to manufacture some iPhones in the country. In Chennai, India, Taiwanese supplier Foxconn, which already manufactures iPhones in factories in China, will lead the assembly of the device by Indian workers, with support from neighboring Chinese suppliers, including Lingyi iTech, which owns subsidiaries to supply chargers and other components for iPhones, according to two people familiar with the plans. Chinese company BYD is also setting up glass-cutting operations for displays, the people said.
They want to diversify, but it’s a tough road. They are so dependent on China.
Gene Munster, managing partner of Loup Ventures, a technology research firm
Apple declined to comment. Foxconn, BYD and Lingyi iTech did not respond to requests for comment.
COVID-19
The disruptions related to COVID-19 have exacerbated Apple’s predicament. When China closed its borders in 2020, Apple was forced to overhaul its operations and abandon its practice of flying hordes of California-based engineers to China to design the assembly process for its flagship product. .
Instead of subjecting staff to lengthy quarantines, Apple has begun empowering and hiring more Chinese engineers in Shenzhen and Shanghai to lead critical design elements for its best-selling product, according to the four people familiar with the operations.
The company’s manufacturing and product design teams began hosting late-night video calls with their counterparts in Asia. After travel resumed, Apple tried to encourage its staff to return to China by offering a stipend of US$1,000 a day during the two weeks of quarantine and four weeks of work, the people said. Although the compensation could be as high as US$50,000, many engineers were reluctant to leave due to uncertainty over the length of their quarantine.
In the absence of travel, the company encouraged staff in Asia to lead meetings that their colleagues in California previously led, these people said. She also assumed responsibility for selecting some Asian suppliers of future iPhone parts.
According to these people, the company is increasingly turning to China to provide high-wage workers to perform these tasks.
Apple has created 50% more jobs in China this year than in 2020, according to GlobalData, which tracks tech hiring trends. Many of these new recruits are Chinese citizens with Western education, the people said.
The change in the way Apple works has coincided with an increase in the number of Chinese suppliers it uses. A little over ten years ago, China contributed little to the production of an iPhone. It mainly supplied the low-wage workers who assembled the device with components shipped from the United States, Japan and South Korea. That labor accounted for about $6, or 3.6% of the iPhone’s value, according to a study by Yuqing Xing, an economics professor at the National Graduate Institute for Policy Studies in Tokyo.
Gradually, China developed local suppliers which began to supplant Apple’s suppliers worldwide. Chinese companies have taken to making speakers, cutting glass, supplying batteries and manufacturing camera modules. According to Xing, Chinese suppliers now account for more than 25% of an iPhone’s value.
The gains illustrate how China has extended its mastery of the smartphone supply chain, said Dan Wang, analyst at Gavekal Dragonomics, an independent economic research firm. “This trend is not slowing down,” he said.