As we wrote late Friday, Apple’s iPhone production relies on the shipping of parts-especially chips-from Taiwan to China. However, Speaker of the House Nancy Pelosi’s trip to Taiwan made China feel threatened. The People’s Republic of China (PRC) apparently felt that the “One China” Policy espoused by the States was being replaced. This policy has the US recognizing that the PRC is China and that Taiwan belongs to the country.
Apple to produce the iPhone 14 series in China and India simultaneously for the first time
China, as we pointed out last night, is demanding that shipments of chips and other supplies sent to assemblers like Pegatron and Foxconn (two of the firms that assemble the iPhone and other devices in China) make it clear that they came from “Taiwan, China” or “Chinese Taipai.” Apple, in a tough position, is urging its suppliers to play China’s game.
Apple CEO Tim Cook visited the Foxconn assembly line where the iPhone is manufactured
With the iPhone 14 lines approximately five weeks away from being unveiled, 9to5Mac noted that the man who knows which soup will be served in the Apple cafeteria on this date in 2023, analyst Ming-Chi Kuo, issued a new report. Kuo says that for the first time, Apple plans on kicking off production of at least one of the 2022 iPhone 14 models in China and India simultaneously.
The TF International analyst pointed out that Apple typically starts production of new iPhone models in China and after a few months starts rolling them off assembly lines in other countries like India and Brazil. Do you want an example? (Geez, what a tough crowd!) Okay, it wasn’t until this past April, roughly seven months after Apple released the 2021 iPhone 13 line, that some production started in India. A few weeks later, assembly of the line began in Brazil.
But here is the main thing to remember. Apple’s iPhone production in countries other than China is usually used to satisfy demand in those specific countries. In the case of India, Apple was seeking to avoid an onerous import tax that would make its phones even more expensive in a developing country. Kuo does state that Indian iPhone 14 production is not for global consumption and wouldn’t be able to make up for any short-term shortfall in China anyway.
Still, the reliable Kuo says that the reason for this decision is due to the geopolitical issues (such as the China-Taiwan tension) that could play havoc with the timely delivery of chips and other supplies from Taiwan to Apple’s contract manufacturers in China. Additionally, Kuo calls the simultaneous production of the upcoming iPhone 14 series in multiple countries an “important milestone for Apple.”
Apple has longed to reduce its reliance on China and it was only a few short years ago when the US started collecting import taxes on shipments from China, a misguided policy that the administration running the country at the time incorrectly said was raising big bucks for the US Treasury. The truth was that the tariffs were paid by either American companies like Apple, or even worse, US consumers in the form of higher prices.
Vietnam could be the answer
You might recall that somehow the iPhone escaped getting hit with the tariff although it did impact other Apple products imported from China. The reason why you might not remember this is due to Apple’s decision to pay the taxes itself so as not to have to raise its prices. But Apple and other US firms that import their products from China need to come up with a contingency plan in case China becomes too unstable, or the next US administration brings back those who enacted the tariff and mischaracterized it to the public.
Apple has certainly been exploring plans to move production out of China, but it isn’t that simple to do. A country must have huge facilities in place, trained workers, and access to the supply chain. One country that has always come up as a potential replacement for China is Vietnam. Samsung produces some devices in the country and will even begin to make semiconductors there starting next year.
Apple already makes AirPods in the country and will soon make the iPad in Vietnam along with the AirPods Pro 2 whenever that product, not yet announced, becomes reality.