I assumed it was firstly access to Chinese manufacturing. They can probably still make humongous profits without the Chinese market, but presumably their global sales rely on first manufacturing in China?
Companies manufacture complex electronics products in China because everyone manufactures there. The skills are there, factories are there - but most importantly, the supply chains are there. You can drive a truck from factory to factory to pick up all the pieces you need. Then drop the truck off at Foxconn. They'll make the products and you can put them back into the truck and drop them off at the port or rail yard.
That's not something you can just replace overnight.
I'm very skeptical that China is the only place Apple can make their products. Sure, Apple doesn't actually "manufacture" anything -- the company outsourced it to Taiwnese CM's like Foxconn, Wistron, and others who have cleary demonstrated that they have no competence, experience, or even desire to build things outside China (see Foxconn's misadventures in Brazil, Wisconsin US). But that shouldnt' be surprising considering that their business model entirely depends on ginormous state subsidies and seemingly unlimited supply of young, unskilled laborers from rural China. Also consider the fact that most critical, high-value components come from not China, but South Korea, Japan, the US (some via TSMC in Taiwan) -- China still makes less than 5% of all chips produced globally (as of 2019 according to US SIA). Of course, they are all assembled/packaged there, but China's contribution to this whole process still accounts for less than 4% of overall value.
I just don't buy the argument that China as the world's electronic supply-chain can't be replaced.
I'm skeptical as well since Foxconn also open a factory in India for Apple.
https://asia.nikkei.com/Business/Technology/Foxconn-set-to-m...
No one is really interested in taking the hit in creating in country supply chains for all of the low value stuff. Vietnam is too small to support that, SE Asia as a whole might work (or maybe India), but both are still politically and economically unstable to do much in this area yet. China has scale and stability.
I see final assembly moving to different countries, but the supply chains will remain plumbed through China for a while.
??? Vietnam has nearly twice South Korea's population (and less than Japan's) and of course, it also has scale, as South Korean businesses in Vietnam have shown repeatedly.
To boot, Vietnam has no immediate internal political threats (eg, compared against China's separatist movements by ethnic minorities in Tibet, Uigher, Inner Mongolia) or no potential regional geopolitical/territorial conflicts with neighbors (eg, Phillippines, Japan, India, etc), other than China. And, most importantly, despite having fought a war half-century ago, America's diplomatic and trade relationship with Vietnam is far less hostile -- it's in fact quite amicable -- than with China.
>> ... but the supply chains will remain plumbed through China for a while.
That's inevitable only b/c of Apple's political clout and relentless lobbying here in the US. I was hoping, while I was no fan of Trump, Trump's trade policy would at least partly address this, but oh boy, how quickly he caved in before Apple and dished out tariff exemptions.
> That's only inevitable b/c of Apple's political clout and relentless lobbying in here.
Apple is like .1% of the political clout and lobbying being brought to bear. Their only notability in this is that they are the only FAANG that has significant business in China.
Sure, as Tim Apple testified before Congress, Apple pays the most tax in the US and is also the most valuable company in the world. I'm pretty sure there is nothing going on between Apple and American/Chinese gov't. /s
Interesting, how much, what percentage is that of Apple revenue and what percentage of total federal tax income?
Of course it can. Manufacturing moved there over the last 30 years for the low regulation and particularly the low wages that keep manufacturing cheap and allow the bosses/owners to make more money. So, all you need is to accept less profit, which the controlling powers won't do without keeping wages/costs down to soften the blow - Western regulations on safety and workers rights means that's hard so prices will have to rise.
You might do it in a decade, but it'll hurt profits. Hence, USA politicians wading in with 'China can't be trusted all our allies must now buy electronics from us' ... which also helps y'all to spy on us too. Double win for USA.
And no, the US isn't interested in bringing the whole supply-chain back home, it just doesn't want a politically or economically unreliable partner.
I assume part of the massive china/apple deal was a promise to stay in china (and act as a passive marketing prop for chinese manufacturing).
Vietnam's plus are its cheap labour and proximity/good relations with China. As labour is growing costly in China, assembling of things is moving to Vietnam. Many components are still manufactured in China and exported to Vietnam.
China can as the electronics supply-chain can absolutely be replaced - at a cost.
I always cringed at Tim Apple's deceptive rambling on the industry's dependence and necessity of supply-chain in China and feared that he was cooking up something more sinister behind the curtain. I recall as far back as 2012 when Tim defended their oversea outsourcing practices on CBS by claiming that "Apple iPhone engines were made in America," even as they were working to offshore that to TSMC in Taiwan shortly afterward.
https://www.business-standard.com/article/companies/made-in-...
And yet, the Apple products I bought for my wife this Christmas state "Made in Vietnam" on the box. And other electronics I've purchased for her recently were similarly not made in China.
China hasn't been the "only" place to manufacture tech for several years now. It's an outdated cliché.
China has never been the only place to manufacture tech ever South Korea, Japan, even Germany/France/USA for us in the UK (LG has grown phenomenally well the last couple of years, Japan in the 80s-90s was the place for UK electronics).
But China seems to have been the principal place for affordable consumer electronics [chips/circuits] for at least the last decade.
This would nearly completely cripple the world's tech economy for a decade, but that is far better then becoming vassals to CCP tyranny.
for the past years but China's wages is increasing and Chinese crack down on tech company like Alibaba, Tencent, DiDi...etc. would it extend to foreign company? Not to mention the rise of Chinese domestic tech company like Xiaomi.
it look like Apple is not making their money back in China with this deal.
"To placate Beijing, though, some capital may have served more like donations to state enterprises and local governments. The company generated $249 billion of sales in Greater China over the last five years, less than the pledged amount."
https://www.reuters.com/breakingviews/apples-ugly-china-deal...
If anything, continuing to manufacture in China is likely required for that market expansion. Otherwise I feel they would have started to diversify to other, less politically tenuous markets.