Apple vs China APPLE CORE
DECEMBER 2019 | MACFORMAT | 17negatively – although it’s hardly the first US
company to do so. One Hollywood insider told
Buzzfeed News in October: “They all do it. They
have to if they want to play in that market. And
they all want to play in that market.” And it’s not
just Hollywood – Google, Facebook and Twitter
are effectively banned there, as are Apple
services such as iTunes and Apple Books. Even
the US National Basketball Association has
fallen foul – it’s facing “substantial losses” after
Houston Rockets manager Daryl Morey tweeted
support for the Hong Kong protestors, causing
the NBA to lose sponsorship and broadcast
deals in China, where the sport is enjoyed by
some 800 million fans.
For Apple, the cost of doing business in
China is more important than most. Around
20% of its global revenues in the last quarter
came from China, accounting for $50 billion
in revenue – and Chinese consumers can be
fickle, happily switching away from Apple to
Chinese brands such as Huawei and OnePlus,
most recently as way to show loyalty to their
home country in the midst of the ongoing
trade dispute between China and the US. In
October, technology market analysts Canalys
reported that Apple sales fell by 28% in China
in Q3, despite a strong showing by iPhone 11,
and ongoing efforts by Apple CEO Tim Cook
to smooth over relations with both the Trump
administration and leaders in China.
There’s also Apple’s dependence on
Chinese manufacturing – not just for churning
out the millions of iPhones, iPads, Apple
Watches and Macs it sells each year, but also
the components they contain. Manufacturing
at this kind of scale requires huge industrial
capacity, relatively low labour costs and a
skilled workforce, as well as a world-classsupply chain that runs from raw materials to
ships. There is growing evidence, however,
that Apple is looking to diversify its production
base and is actively encouraging its suppliers to
investigate territories like Vietnam, Malaysia,
India and Indonesia, as Nikkei Asian Review
reported in June: “Key iPhone assemblers
Foxconn, Pegatron, Wistron, major MacBook
maker Quanta Computer, iPad maker Compal
Electronics, and AirPods makers Inventec,
Luxshare-ICT and Goertek have all been
asked to evaluate options outside of China...
Many other Apple suppliers, such as print
circuit board and casing providers, are closely
monitoring where these major assemblers
would shift their production.”
Analysts suggest up to 30% of Apple
production could move to other countries in
South Asia, but doing so would take time, and
that would still leave 70% of production, and
billions of potential customers, in China for
Apple to come to terms with.macformat.com @macformatMade in the USA? >
While the overwhelming majority of
Apple products are made in China,
not all of them are – the new Mac
Pro is being built in Austin, Texas,
where the previous ‘trash can’
model was also made. However,
while some of the components that
make up the Mac Pro are made in the
US (Apple says it sources parts for
all its products from 36 US states,
supporting 450,000 jobs from
9,000 suppliers), the overwhelmingmajority still come from China –
which is why Apple argued hard that
key components from China should
be excluded from US government
tariffs. These so-called ‘federal
product exclusions’ cover just 10
Mac Pro items, including the Magic
Trackpad and Magic Mouse. However,
other components including the Mac
Pro’s wheels, power cable, IO circuit
board and CPU cooling system are
subject to 25% tariffs.Some of Apple’s products are now
being manufactured in the US, but
a great deal of component parts
still come from China.- Netherlands
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