Apple’s mutating supply chain sees winners and losers

Ongoing changes Apple and others are making to the manufacturing supply chain are being reflected internationally as some plants close down and new ones appear elsewhere.  This is also likely to see a spate of M&A activity as some existing big names in manufacturing seek to set up shop on new shores.

All change on the factory floor

The root of these changes first became visible when US firms turned against China at about the same time Chinese workers began to demand more money for what they do. The pace of change accelerated with Covid, as corporations including Apple found they needed to build in more resilience to cope with sudden factory shutdowns and disease outbreaks. Today we’re seeing major manufacturers invest more cash in new places — India leads the pack, but Vietnam, Thailand, and Malaysia are in the frame.

We’re also seeing manufacturing shift between more traditional nations. 

In the UK, the national shame of Brexit continues to impact international trade, and one victim of this may be Apple’s Face ID sensor supplier, Coherent.

I don’t know, but it’s not terribly hard to imagine that the additional costs and shipping challenges posed by purchasing and making important iPhone components in the UK for shipping abroad caused problems in the supply chain as additional excise protections and tariffs kicked in. That may not be the motivation in play, but Apple appears to have designed those chips out in future iPhones all the same.

New centers are emerging

Italy is making progress. Apple partner STMicroelectronics will build the world’s first fully integrated silicon carbide (SiC) facility there for a $5 billion investment. 

The company says this is aimed at automotive and industrial customers and points to SiCs’ improved thermal conductivity, which makes for better energy efficiency. 

No mention of Apple is made, but it is clear that the need for energy efficiency is something that unites technology customers across the entire industry, and the iPhone maker continues work toward that end. 

Those goals mean that even Apple and its partners with their huge iPhone factories need to be made more energy efficient, right? This matters on a planet on which Apple supplier Foxconn was recently asked to cut its energy use by 30% in Vietnam. The nation experienced dramatic power cuts last year following a heat wave and is attempting to avoid that in future.

In India, Apple’s work to bring key suppliers to building iPhone manufacturing facilities is now widely known. This is an accelerated project, and the nation is expected to be making at least 25% of all iPhones within the next year or so, mostly through Taiwanese firms based there. India’s giant Tata group has also grabbed a slice of Apple’s pie. 

Apple partners are also expanding into the other hot spots such as Indonesia, Vietnam, and Thailand. We’re seeing Macs and other Apple products manufactured in those places, in addition to — and sometimes instead of — China. 

China takes its slice

But China isn’t sitting still. Large Chinese firms are also investing in manufacturing across Southeast Asia. Big names including Goertek, BYD, and Luxshare are also setting up shop. Apple’s own suppliers list confirms that around a third of its 35 suppliers in Vietnam are owned by Chinese firms. Like Apple, which will open its first Malaysian retail store in Kuala Lumpur on June 22, they are chasing growth as more traditional markets (China and elsewhere) experience slowdown. 

This expansion in manufacturing across the region poses additional problems. We alluded to infrastructure in the form energy supply earlier, but competition for staff and land is also intensifying, which may push local suppliers out of the way — or prime them for future acquisition by larger firms with deeper pockets as the tech industry supply chain morphs into this new shape. 

Final thought? 

Apple wasn’t alone when it began building up its business in emerging economies, but the well-heeled company hasn’t wasted its early start and at this point has the catbird seat for further expansion as those markets continue to grow. And it didn’t take a generative AI chatbot to plan any of these moves. 

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