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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 increasingly 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.

Countries will battle for Apple’s business outside China – analyst

The battle for Apple's business outside China

We will see different countries around the world battle for Apple’s business throughout the 2020s, suggests a respected analyst, as the Cupertino company continues its efforts to reduce its manufacturing dependence on China.

The report notes that we currently see four variations of the familiar “Designed by Apple in California, Assembled in China” label…

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Report: App Store includes apps from blacklisted Chinese group tied to Uyghur genocide

App Store

A new report from The Information this morning highlights that Apple is hosting a number of apps on the App Store made by a Chinese paramilitary group that’s been blacklisted by the US government. Apple says that it’s complying with US law but the news comes as the company is facing more pressure to cut any possible ties to abuse and genocide against the Uyghur Muslim people in the Xinjiang region.

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Tim Cook to attend 2021 China Development Forum amid continued tension

apple music china

As Apple continues to navigate its tricky relationship with China, Tim Cook is set to attend this year’s China Development Forum (CDF) put on by the Chinese government. The 2021 CDF is expected to see its biggest ever foreign attendance hinting that despite political turbulence and some companies moving manufacturing out of the country, China remains a powerful hub for global business.

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iPad production in India a step closer as incentives approved

iPad production in India a step closer

The possibility of iPad production in India got a step closer today, as the government approved a proposal to offer a billion dollars’ worth of incentives. The production-linked incentive (PLI) plan is specifically aimed at manufacturing tablets and computing equipment.

A previous report said that Apple was interested in using the incentives to begin iPad assembly there…

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iPad assembly could start in India as government offers incentives

iPad assembly could start in India

Apple is reportedly in discussions about starting iPad assembly in India, alongside the iPhones it already makes there.

The Cupertino company had previously succeeded in lobbying the government for financial incentives for setting up and then boosting iPhone assembly in the country, and new incentives are now being offered for local assembly of tablets and laptops…

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Analysts suggest iPhone plant riot could have long-term implications

iPhone plant riot was in Bangalore

The iPhone plant riot in India over the weekend is not expected to have much immediate impact on production in the country, but analysts suggest that it might have longer-term implications.

Reports variously say that between ‘hundreds’ and two thousand workers took part in the riot at Wistron’s iPhone assembly plant in Bangalore. Production was suspended due to the damage …

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Former Supplier Responsibility staff say Apple complicit in labor law violations

Apple complicit in labor law violations

Three former members of the Apple Supplier Responsibility team say Apple was complicit in labor law violations in China. They are supported by a former Apple senior manager familiar with the company’s Chinese operations.

They say Apple was aware of the violations by its suppliers, but took no action because it feared that to do so might delay product launches …

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Tripadvisor app pulled from App Store in China, with 104 other apps

Tripadvisor app pulled from App Store

The Tripadvisor app has been pulled from Apple’s App Store, along with 104 other apps. The Chinese government said that this was part of a ‘clean up’ of the Internet – though it has likely been done for political reasons.

Apple has also sent an email to Chinese games developers who have not yet provided proof of approval from the government, warning them that their apps will be removed on January 1 …

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Pegatron India: $150M investment as first stage of reported $1B plan

Pegatron India plant investment

Apple’s work to reduce its manufacturing dependence on China took another step forward as Pegatron’s board approved an initial $150M investment in a new plant in India. It was reported in July that Pegatron’s India plans will eventually see the company invest around a billion dollars in the facility.

A follow-up report in the summer said that Pegatron was making preparations to join Foxconn and Wistron in setting up an iPhone plant in India, but plans were reportedly delayed by the coronavirus crisis …

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Apple removes more RSS apps from Chinese App Store, likely at government behest

RSS apps

Some three years after Apple removed RSS apps Feedly and Inoreader from the Chinese App Store, it has now done the same with Fiery Feeds and Reeder. In both cases, this is likely following a demand from the Chinese government.

China uses what’s colloquially known as the Great Firewall of China to block web content it doesn’t want its citizens to read, which notably includes any criticism of the government …

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