China is becoming a potential risk for many US companies. First, there is the ever-present threat of a political problem arising between China and the US. And then, companies have now seen the direction China can take when problems like the covid pandemic arise.
Potential alternative countries are not that far away
Apple already has a small part of its production in India and Vietnam. So in these countries, Apple could expand its production and diversify its plants a bit more so that a potential production failure in one country would not cause a major problem for the company.
Now, according to analysts, more than 90% of Apple’s products are made in China. Such heavy dependence on a given country makes Apple’s supply chain very vulnerable. For example, just over 3% of the world’s iPhones were made in India last year, and almost all the rest were in China.
Apple sought to diversify its operations outside of China before Covid-19 expanded globally in the early 2020s. So now the Californian company is renewing that effort and will be looking for other manufacturing options along with its suppliers.
The other country mentioned, Vietnam already hosts the manufacturing facilities of another tech giant, Samsung. This company has previously limited its manufacturing involvement in China. On the other hand, it has long been manufacturing its electronics at home in South Korea, but also in Brazil and Indonesia.
Of course, relocating part of its production may create the problem of an insufficiently skilled manufacturing workforce. After all, this move will create a lot of new jobs. Perhaps that is why Apple recently launched a new Supplier Employee Development Fund.
Today, we're launching a new Supplier Employee Development Fund, creating new opportunities and expanding the reach and impact of education programs available to employees across our global supply chain. https://t.co/AFnCVsZZSP
— Tim Cook (@tim_cook) March 30, 2022