The first iPhone 14s of this year were assembled in Chennai, India this week. The country has been manufacturing them for some time now, and these phones will serve a large domestic market with high demand-pressure on supply levels.
It’s a big deal for Apple, marking their first phone release outside of China in the same year it came out. And this is an important step towards Apple’s most sensitive projects: trying to decouple themselves from what happens with Sino-American relations!
According to TechCrunch’s Manish Singh , ”India has become the second-largest smartphone market in world and analysts are suggesting that this may be a sign for manufacturing to shift.”
In 2017, Apple began assembling phones in India. The process has been limited to putting together previous years’ devices for the domestic market so far because low-cost smartphones are a bigger chunk of sales within this developing economy and first year models can iron out any kinks before exporting them elsewhere.
The production of high-tech electronics is not just done in China because it has low skill, but rather the opposite. The country produces cutting edge technology while having an outdated view on what’s appropriate for its market place due to past stereotypes about Chinese manufacturing capabilities which have since changed thanks largely towards this work being done there by companies such as Apple who rely heavily upon them.
Apple has tried to recreate their clout in other products over the years. Most famously, they turned towards Texas for manufacturing and ended up with a ”trashcan” Mac Pro computer which failed to meet the expectations from professionals in 2013 but seems like it could be coming back now because of its replacement was manufactured by Quanta Computer this year (2019) six years later made in China instead! Apple has been making more of an effort recently to replace Chinese manufacturing, rather than politically motivated attempts.
Analysts at JP Morgan report that Apple has set goals for its Indian production, expecting a quarter or more output by 2025 depending on progress so far- and Vietnam isn’t wasting any time either! They plan on producing fifth of iPads & Watches as well as half of AirPods which would mean great benefits.
International diversification is important for many reasons, but one of the most pressing considerations today are global security risks. China’s continued growth presents a Tail Risk that countries could rely on their authoritarian state to behave rationally and predictably- which has been shown time after again when it doesn’t happen like America trying to enforce Russia style sanctions on them; while others see this move coming eventually even if it seems unthinkable at first glance.
We live in an era where corporations must take into account potential global issues before they arise so there will likely come a time when Apple needs know how their products work best when sold across borders with different regulations.
There are many ways in which relations between China and Taiwan can get more tense. This summer, Apple requested that suppliers label the origin of their products as “Chinese Taipei” to comply with a long-standing. The people of Taiwan have an opposite rule, it is required that products should be labelled as either “ Taiwans” or the official name for their country which is “Republic Of China.”
The long-standing balancing act between Chinese and American interests could become untenable. Where once western companies were able to do what they wanted within China, as long as their domestic policies conformed with Beijing’s line but this is no longer the case! They have mobilized large grassroots campaigns against organizations that acknowledge Taiwanese independence, ethnic cleansing of Xinjiang people, or their repression in Hong Kong.
Human rights activists have repeatedly accused Apple of aiding Chinese censorship by removing apps such as the New York Times and Grindr. The company has been able to avoid most of the criticism from western activists and governments for its complicity in human rights violations. It seems that at any moment, a new crisis could bubble up and heighten the contradictions inherent in its position.
Apple’s exposure to China is quite literally too big for any company, not just because of its manufacturing but also due the size and potential revenue from this market. More than 17% of global revenue came from “greater china” in one quarter. In China, there are more than a billion people and they still have the world’s wealthiest middle class. Their GDP per capita is $10K still has a wealthy middle class who are comfortably bigger than the entire population of the UK!
The economic impact of losing this market would be catastrophic for Apple, regardless how diversified their manufacturing has become. In other words this isn’t an end-of story but just get started! Apple has not responded to our request for comment.
