Apple's China supply chain remains strong despite focus on India, SE Asia

China still enjoys dominance in Apple’s key supply chain segments, even as the global tech giant’s share of electronics manufacturing in the country has dropped from around 70 per cent to 50 per cent over the last seven years amid increasing focus on India and Southeast Asia, a report by a US-based public policy think-tank American Enterprise Institute (AEI) said.

 

According to the report, key supply chain segments, such as printed circuit boards, printing and packaging, molded and mechanical components, and especially precision manufacturing remain predominantly in China, leaving scope for policymakers in countries like India to focus on attracting investment from its suppliers in such manufacturing capabilities.

 

Interestingly, despite this dominance, Chinese-owned firms generally only play a role in lower-value segments of the supply chain. Many of the higher-value components— even those made in China— are produced in factories owned by Japanese, Taiwanese, or US firms, the report said. 

 

It indicated that the monopoly of China in electronics manufacturing for Apple is declining over the years. The assembly of all components into a device— the final step in the production process— is referred to as electronics manufacturing or assembly.

 

“Beginning in 2018, Apple began to shift its electronics manufacturing footprint, presumably driven by the 2018 US tariffs on China. Before 2018, around 60–70 per cent of electronics manufacturing locations were in China, including nearly all final assembly of key devices like iPhones. Today, by contrast, around 50 per cent of Apple facilities are in China, with increased factory share in India and Southeast Asia,” the report said.

 

Of the 17 companies conducting electronics manufacturing in Apple’s supply chain, only two are Chinese. Of the 34 electronics manufacturing facilities reported in China, only three are operated by Chinese firms. 

 

The report suggests that policymakers in India and countries in Southeast Asia seeking to attract investment and upgrade their manufacturing capabilities have substantial scope to continue attracting suppliers of companies like Apple, in not only basic assembly, but also some of the other component categories.

 

“The fact that many of these China-based factories are owned by foreign firms facilitates potential supply chain shifts. Moreover, as western electronics firms face higher tariffs, they are looking for more diversified production locations,” it said.

 

The report is authored by Chris Miller, a non-resident senior fellow at the AEI, and Vishnu Venugopalan, a fellow at Harvard University and an Indian Administrative Service officer.

 

It added that the assembly process for devices like phones often only cost around $10, a tiny fraction of its price. Hence, if tariffs lead to a shift in electronics manufacturing, shifting final assembly from China to a different country — without any other changes in its supply chain – will have minimal impact. 

 

Interestingly, the US major has diversified the battery ecosystem, which was solely dependent on China and South Korea till 2018, to multiple other countries.

 

“Today, however, it procures battery components from five different regions, including India and Southeast Asia. While over half of Apple’s battery component sourcing locations remain in China, more than 40 per cent of locations are now outside China, representing a significant shift in Apple’s production footprint. Notably, the concentration of China-based manufacturing facilities is greater than the share of Chinese firms. As of 2023, there were firms headquartered in Taiwan, South Korea, and Germany in Apple’s battery supply chain—more non-Chinese firms (five) than Chinese (four)," it stated.

 

The connectors and cables category involve some low-end products and some that require more high-end, specialty chemicals.

 

“The enduring position of Japan-based manufacturing in this category illustrates the higher-end manufacturing involved in certain components. Other segments, however, have seen a substantial shift from China to India and the ‘other’ category, mostly Southeast Asian countries,” it added.

 

Of the nine companies producing products in this category, only one is Chinese. Other firms in this category with China-based manufacturing are American, Taiwanese, or Japanese — companies like Amphenol (US), Japan Aviation Electronics Industry (Japan), Furukawa Electric (Japan), and Hirose Electric (Japan).