china Overview Updated November 30, 2022

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September 2010 - December 2022

China

China has been fundamental to Apple’s historical success, but is also arguably the greatest risk to the company’s future.

Why are most Apple products made in China?

Although everyone assumes Apple products are made in China because labor is cheap there, that’s only part of the story – and an increasingly small part, as the company’s assembly partners move toward more and more automated operations.

Steve Jobs originally transferred most Apple manufacturing to China because it was the only country in the world with a huge ready-made supply-chain network, and the ability to scale up production almost overnight. There are three main reasons China – and specifically the Shenzhen area – is such a powerful manufacturing center.

First, the city is strategically placed, serving as the gateway between mainland China and Hong Kong. It is one of the largest shipping centers in the world, with a massive container port.

Second, the Chinese government established Shenzhen as the first Special Economic Zone (SEZ) in the country. SEZs are designed to encourage enterprise through relaxed planning regulations and generous tax incentives – and crucially, to facilitate foreign investment in local companies. It is this, as much as its geographical advantages, which has enabled it to grow at such a pace.

Third, that SEZ was established way back in 1980, meaning that the city has had over 40 years to grow into the manufacturing center of the tech world. Apple relies on a huge network of suppliers and sub-contractors, some of which may make just a single tiny component. The majority of them are based in Shenzhen and its immediate surrounds, so the logistics of bringing everything together in one place for assembly are straightforward.

What are the risk factors with China?

Being over-dependent on China carries a number of risks.

First, there is the generic one: Being overly dependent on any one country is a strategic risk. For example, the COVID-19 pandemic originated there, and had a massive impact on manufacturing capacity. Anything from a natural disaster to political upheaval could disrupt operations within a single country, so it is always wise to have a diverse range of manufacturing centers around the world.

Second, the relationship between the US and China has often been fraught. The trade war started by the previous US administration was a particularly low point, but continued tensions mean that there is always a risk of disruptions to trade between the two countries.

Third, it is increasingly damaging to Apple’s reputation to be so closely associated with a country that has a worsening human rights record – especially when the iPhone maker has no choice but to comply with local laws, however much they may conflict with the company’s own values. Apple has been required to remove VPN and a variety of other apps from the Chinese App Store, allow the iCloud data of Chinese customers to be stored on government-controlled servers, and more. Additionally, there have been growing reports of forced labor in China, including within many different areas of Apple’s supply chain.

What is Apple doing about it?

Apple has been working for a long time on diversifying its manufacturing operations, and has in recent years accelerated the pace at which it is doing so.

As explained above, this is far from an easy undertaking, but Apple now has major manufacturing operations in India, Thailand, Malaysia, and the Philippines, among other countries.

In India in particular, we are seeing the very early stages of a complete supply-chain infrastructure as the government uses a mix of carrot and stick to encourage companies to manufacture more of their components within the country – namely, tariffs on imports of components and tax breaks for local production. COVID-19 lockdowns in China also saw Apple move some iPad production to Vietnam for the first time, but it’s clear that the risks of over-dependence on China have never been greater.

china Stories December 1

Foxconn closed-loop production, in which workers remain inside the campus 24/7 for up to a month at a time, is to continue – despite the fact that most of the city has been released from lockdown.

It had been hoped that a return to normal operation would improve conditions for workers, and help the company recruit new staff to replace those who left, but these hopes appear to have been dashed for now …

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china Stories November 30

Apple’s dependence on China has never been brought into sharper focus than now, with COVID-19-related disruption at the biggest iPhone assembly plant costing the company an estimated billion dollars per week.

A new report says that the company’s efforts to diversify production have continued to make progress, but that iPhone production remains hugely dependent on China …

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The iPhone City lockdown has ended, allowing free movement of residents and workers in Zhengzhou, China. The move will help relieve pressures at the Foxconn plant after a massive production disruption that is estimated to have cost Apple around a billion dollars a week in lost iPhone sales.

The ending of COVID-19 restrictions in the city will allow Foxconn to exit the closed-loop production process, which has been a key factor in the plant’s recent troubles

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china Stories November 28

The iPhone 14 Pro shortage could hit as many as 6 million units before production recovers, according to a new report. The shortfall has already made it too late to order either of the Pro models in time for Christmas in many countries.

Additionally, large-scale lockdown protests in Shanghai could potentially put MacBook production at risk …

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china Stories November 24

Foxconn admits it made a “technical error” that resulted in newly recruited iPhone workers being paid less than they had been promised. The admission follows violent clashes between workers and police at the world’s largest iPhone plant in Zhengzhou, China.

The company has pledged to correct the error for those who stay, and has offered compensation to any new recruits who no longer want to work there …

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china Stories November 23

Violent clashes between iPhone workers and police have been seen in video footage from Foxconn’s primary iPhone assembly plant in Zhengzhou, China. You can see the video clips below.

Workers say that promised bonuses (referred to in local reports as “subsidies”) have not been paid; that there is inadequate food and medical supplies for workers locked into the facility; and that the company is failing to properly separate infected and uninfected employees …

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china Stories November 17

Two new market intelligence reports show that the iPhone dominated in both Southeast Asia and in China’s latest online shopping festival.

Both reports indicate a fall in overall smartphone shipments and revenue, but show the iPhone substantially outperforming the market …

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china Stories November 11

The iPhone production crisis in China has led Foxconn to announce plans to quadruple its workforce in India. The move will not, however, solve the immediate problem.

While Apple and its suppliers have been working for years on reducing the company’s dependence on China as a manufacturing hub, progress has been painfully slow – especially for the iPhone …

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china Stories November 10

The COVID-19 disruption to iPhone 14 production at Foxconn’s primary assembly plant was bad enough for Apple to issue a warning about limited availability, and Foxconn has now issued a warning about the impact on its own prospects for the current quarter.

Foxconn says that revenue from consumer electronics assembly will fall in the all-important holiday quarter, which is usually a busy one for the company …

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china Stories November 9

China’s COVID-19 outbreaks are getting worse rather than better, with another major manufacturing and export hub under lockdown.

Some 4 million people in Guangzhou have been told to stay home, in what government officials have described as the worst outbreak since the start of the pandemic

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china Stories November 2

The Foxconn plant in Zhengzhou – colloquially known as iPhone City – is entering a week-long lockdown from today, following a growing COVID-19 outbreak within the facility.

Given that the plant was already operating closed-loop production, where workers live and work within the campus for up to a month at a time, it’s not immediately clear what form the iPhone City lockdown takes, but one report refers to it as a “seven-day closure” …

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china Stories November 1

Foxconn has more than tripled iPhone worker bonuses as it fights to persuade them to remain working in extremely tough conditions amid a COVID-19 outbreak within its largest iPhone assembly plant.

For those who go further, and agree to forgo their leave this month, the bonus could amount to a 1,000% increase – from 1,500 yuan ($200) to 15,000 yuan ($2000) …

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china Stories October 31

iPhone workers have reportedly been walking out in significant numbers after an outbreak of COVID-19 at the world’s largest iPhone assembly plant in Zhengzhou, China.

Some are worried about the risk of the infection, while others are unhappy about Foxconn’s stringent lockdown policies, which allow the plant to continue operations …

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china Stories October 27

A new market intelligence report says that iPhone shipments grew 36% year-on-year in China in Q3, while all other major brands saw theirs fall between 16% and 27%.

The data says that this saw Apple’s smartphone market share in the country grew from 11% to 16%, but the news for the iPhone maker wasn’t all good …

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china Stories October 26

A reported Foxconn COVID-19 outbreak in Zhengzhou – known locally as iPhone City – has been confirmed by the company, with some impact on iPhone 14 production.

However, Apple’s primary iPhone assembler says that the number of cases is low, and iPhone 14 production remains “relatively stable.” Foxconn has introduced tough lockdown rules to minimize the spread …

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china Stories October 24

A new piece today argues that Apple chipmaker TSMC is at ever-growing risk from China, and questions the wisdom of the Cupertino company allowing itself to become wholly dependent on a single company.

With the US now actively seeking to hamper China’s own chip fabrication industry by imposing export controls on chipmaking equipment, there are fears that this greatly increases the chances of either TSMC or Taiwan as a whole suffering retaliatory measures …

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china Stories October 17

Plans by Apple to buy up to 40% of iPhone flash memory chips from Chinese company YMTC have reportedly been abandoned after the US government imposed export controls on the chipmaker.

It’s reported that the Cupertino company had a two-step plan for purchasing memory chips from the Chinese company Yangtze Memory Technologies Co …

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china Stories October 12

A new report claims to reveal more about Apple’s medium-term plans to expand and “deepen” iPhone production in India as it works to reduce its reliance on China.

It follows and supports yesterday’s suggestion that enough iPhones for the entire US market could be made outside China within three to five years

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china Stories October 5

On paper, Apple US manufacturing operations doubled between 2020 and 2021 – but the likely reality is that the vast majority of US production is carried out on a small scale, for test purposes.

The number of US manufacturing sites among Apple’s suppliers increased from 25 to 48 in the course of a year, according to the company’s latest supplier list …

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Some AirPods and Beats headphones are to be made in India for the first time, as Apple continues a gradual reduction of its dependence on China for product manufacturing.

AirPods production is predominantly split between Foxconn and Luxshare, and a report today says that Apple has instructed both companies to move some of their assembly work to India …

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china Stories September 30

We’ve been talking for many years about both the need and the difficulty of reducing Apple’s dependence on China, and Bloomberg’s research division has now put some estimated numbers on it.

The research suggests that moving just 10% of Apple production out of China would take around eight years …

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china Stories September 21

iPhone production in India will increase to around 25% of total global output by 2025, according to a new analyst report. The report suggests a similar percentage of other Apple products will be made outside China by the same year.

We’ve seen a number of signs recently that India is growing increasingly important to Apple as a second key manufacturing hub, as the company continues efforts to reduce its dependence on China …

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china Stories September 16

A Chinese spy carrying out industrial espionage against GE Aviation and Honeywell’s aerospace division was caught with the help of access to an iCloud backup of his iPhone. The data obtained included a never-before-seen copy of a security form used by the Chinese security service when recruiting spies.

Xu Yanjun, an officer in China’s Ministry of State Security (MSS) was arrested and brought to trial in the US after investigators lured him out of the country to a meeting in Belgium, from where he was extradited to America …

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china Stories September 8

The controversial Apple data center in Guiyang, China, has been hit by the latest citywide COVID-19 lockdown to be imposed by the government.

The data center is currently taking emergency measures, including closed-loop operation, in an attempt to keep the iCloud server online …

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