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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 tries to exert control over Apple Intelligence launch there

A top government official has warned that an Apple Intelligence launch in China would be a “difficult and long process” unless the iPhone maker partners with a local AI company. Working with a Chinese company would instead be “simple and straightforward.”

Apple had reportedly been exploring using its own generative AI models in China, but a top regulator has strongly implied that this wouldn’t be in the Cupertino company’s best interests …

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TSMC says it reported itself to US govt; Apple chip production may be at risk [U]

TSMC may have breached US sanctions – Apple chip production could be at risk | Huawei smartphone shown

The US Commerce Department is carrying out an investigation into whether Apple chipmaker TSMC breached US sanctions against China by supplying smartphone and AI chips to Huawei. The probe was in part driven by Huawei’s surprising ability to resume competing with iPhones.

Update: A new report today says that TSMC reported itself to the US government based on its own suspicions about an order.

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China has detained four employees from the world’s largest iPhone plant

China has detained four Taiwanese employees at the world's largest iPhone plant | Stock photo of prison cells

China has detained four Taiwanese employees at Foxconn’s Zhengzhou plant, the largest iPhone production facility in the world, responsible for around 80% of global production.

The employees were detained using powers the Chinese government last year granted to itself. No specific reason has yet been given, but it seems likely the move is political …

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Apple trying to pressure WeChat into blocking a payment loophole; developer refusing

Apple trying to pressure WeChat | Stylized Apple and WeChat logos

Apple is trying to pressure WeChat – the world’s most popular app – into blocking a payment loophole for in-app purchases. If app owner Tencent fails to comply, Apple says it would block essential updates.

The report says the same threat was made to ByteDance’s Douyin, the local version of TikTok, which subsequently complied. But three months later, Tencent is still refusing …

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Apple research lab opening, focusing on boosting quality and reliability

Apple research lab opening focusing on boosting quality and reliability | iPhone with smashed back glass

A new Apple research lab is about to open in China, focusing on boosting the quality and reliability of iPhone, iPad, and Apple Vision products.

The company chose the city of Shenzhen because many of its suppliers are based there, and it will be working closely with them to test new materials and production techniques …

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Apple Intelligence plans in China still unclear due to legal concerns

Apple Intelligence features

How Apple Intelligence will work in China remains unclear, as the company has to navigate the country’s generative AI regulations.

A new report says that Apple concluded it was unlikely to get approval to use a system developed outside of China, suggesting that more of the off-device AI will be powered by Chinese companies …

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Apple chip plants can’t be moved, despite China’s war games, says TSMC

Apple chip plants can't be moved, despite China's war games | Stock photo of fighter jet

TSMC’s Apple chip plants cannot be moved off the island, the company has said, despite ever-growing fears of a Chinese invasion.

The chipmaker’s chairman C.C. Wei said that it had held talks with “some customers” about the idea following China carrying out war-game exercises around the island, but that it simply isn’t practical …

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Apple chipmaker TSMC makes contingency plans against Chinese invasion of Taiwan in 2027

Contingency plans against Chinese invasion of Taiwan | Chinese soldier

The prospect of a Chinese invasion of Taiwan is a nightmare scenario that keeps western intelligence agencies awake at night, and there are growing concerns that this could happen in 2027.

With the US legally obliged to defend Taiwan, the potential consequences could be catastrophic, placing two of the world’s biggest superpowers at war. But among the less extreme scenarios that have been modelled, one of them is what happens if China gets its hands on TSMC’s chipmaking capabilities …

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Apple heavily discounting iPhones in China – up to $318 off

Apple heavily discounting iPhones in China | Shopping bags with $318 off label

With Chinese brand Huawei having risen from the ashes, a new report describes Apple heavily discounting iPhones in the country, offering up to $318 off the iPhone 15 Pro Max as it seeks to compete.

The latest round of discounts are much higher than those offered back in February, and really throws into contrast the US offer of slightly better trade-in values on older phones …

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