In context: Apple is optimistic about the future despite the effects of tariffs, slowing iPhone sales and coronavirus quarantines in factories. The company’s dependency on China remains strong, but some executives have pushed against that since 2015.
It’s a well-known fact that Apple relies heavily on China for its manufacturing needs. For the past few years, the Cupertino giant has been exploring ways to shift production to other places like India and Vietnam, but not even a trade war or coronavirus have made that more likely to happen in any significant capacity in the near-term future.
The coronavirus crisis, in particular, has put a lot of pressure on manufacturers like Foxconn and suppliers like Genius Electronic Optical, to the point where it looks like production will ramp up slowly over the next few months.
It turns out that Apple’s insistence on keeping its dependence on China has deeper roots. According to a report from the Wall Street Journal, some company executives have suggested moving the assembly of at least one product to Vietnam, an idea that has been “rebuffed” by senior management.
The proposal dates back to 2015, and the reasoning behind it was that relocating production of a product to Vietnam would kickstart a “multiyear process of training workers and creating a new cluster of component providers” outside of China. Higher-level executives dismissed the idea, invoking the difficulties and risks of such an undertaking.
Apple does make some older iPhones in India, including the iPhone XR. The Wall Street Journal says the company even planned to assemble the iPhone 11 in the country, but eventually realized that India didn’t have enough skilled labor or a sufficiently robust infrastructure, so it opted to make the handset in China.
Foxconn has shown its intentions to expand to Vietnam, but just like India, it has a long way before there are enough local suppliers and skilled workers that can produce Apple’s premium iPhone models with OLED displays. Instead, the company only makes the AirPods Pro in Vietnam, mostly to avoid import tariffs in the US.
Tim Cook may have made Apple too dependent on China, which is evident in a recent interview with Fox Business where he was asked about moving beyond the region for its manufacturing needs. He noted that “the question for us after we get on the other side will be ‘Was the resilience there or not, and do we need to make some changes?’ My perspective […] is that if there are changes, you’re talking about adjusting some knobs, not some kind of wholesale fundamental change.”