Despite all the political pressures against China, the country still ousts Taiwan as Apple’s biggest source of suppliers. According to Nikkei Asia, “Washington’s attempt to untangle the U.S. and Chinese supply chains has had little impact on the world’s most valuable tech company.”
Of Apple’s top 200 suppliers in 2020, 51 were based in China, including Hong Kong, according to a Nikkei Asia analysis of the Apple Supplier List released last week, up from 42 in 2018 and knocking Taiwan out of the top spot for the first time ever. Apple did not release data for 2019.
As reported by the publication, even though Apple is diversifying its supply chain, the Chinese suppliers are the ones helping Apple to do that in other Asian countries.
For the U.S. company, there are a few reasons to keep its partnership with China: growing manufacturing and tech capabilities combined with competitive prices. Suppliers win orders by offering very low prices that non-China factories find hard to imagine, according to one Apple supply chain manager.
“They are willing to take low-margin businesses that other suppliers are reluctant to pick up. This way, they could gradually level up by working with Apple and can later bid for more business the next time.”
Nikkei also notes that the only Chinese supplier that Apple has cut ties with is O-Film Technology after the US government banished the touch and camera module maker over alleged human rights abuses.
A senior analyst with GF Securities, Jeff Pu, says Apple benefits from other smartphone makers such as Huawei and Oppo to have a world-class electronics parts and assembly supply chain in China.
“The only electronic components that China cannot yet catch up on are semiconductors,” Pu said. “The growth of China’s suppliers on [the] Apple Supplier List also shows that China contained the COVID-19 pandemic well in 2020.”
Eric Tseng, chief analyst with Isaiah Researcher, says that although the US government had tried to cut its ties with China, little was the impact on Apple.
“We did not see any clear sign that Apple has reduced procurement and engagement with Chinese suppliers due to geopolitical tensions or factors,” Tseng said. “Apple basically chooses and qualifies its suppliers based on cost. That’s why many Chinese suppliers, from Luxshare to BYD, have gained more business in the past few years.”