It was not until the historic pandemic that China’s role in the global supply chain was understood. A severe outbreak in one country triggered tremendous disruption to the flow of goods during the tough period. Meanwhile, American companies, under the US-China ongoing tensions, are forced to flee the nation.
“But a breakup, as the saying goes, is hard to pull off,” Bloomberg’s report on the case of tech giant Apple on Friday.
To reduce its reliance on China, Apple considered alternatives, and it already began collaborating with India in manufacturing iPhone 14. Its largest supplier Foxconn Technology recently sealed a $300 million deal to build facilities in Vietnam.
The longstanding link between Apple and China makes the moving process extremely tedious. It’s estimated that it will take the company 8 years to move only 10% of its production capacity to other countries. China manufacturing accounted for nearly 98% of iPhone production.
As a point of fact, it’s impossible to completely move production elsewhere since 70% of smartphone manufacturing is made in China. Apple could find itself in a problem if it cuts off this supply chain, which has a major stake in the game.
China is a lucrative market for American tech giants due to its low-cost labor, loose manufacturing laws, and lack of taxes. As e-commerce evolved, billions of dollars were poured into Chinese manufacturing.
Everything was going swimmingly until political pressure arrived. Cutting ties with China may have long-term consequences for the global economy in the wake of a recession.
Amazon, HP, Microsoft, Cisco, and Dell are among the other tech behemoths that rely on Chinese manufacturing to lower degrees. According to Bloomberg, companies can reduce their reliance by 20-40% by 2030. Downsizing production in China has already begun, but complete emigration remains a long way off.
India, Vietnam, Malaysia, Thailand, and Indonesia emerged as viable alternatives. Taiwan, with its superior semiconductor production, is a vital link in the American supply chain. Taiwan Semiconductor Manufacturing Co.Ltd now produces 90% of the world’s most advanced chips and 85% of the world’s cell phone chip supply markets.