For a while now, it has been reported that Apple is diversifying its supply chain outside China. Reiterating those claims, a new report by The New York Times states that other tech companies like Google, Amazon, and Microsoft are also “slowly” shifting their production away from China, along with Apple.
The tech companies have found refuge in Vietnam, Malaysia, India, and Taiwan as alternatives to China to produce various electronic products.
But it’s not just smartphone production that is moving out the country. Apple is producing iPads in northern Vietnam. Microsoft has shipped Xbox game consoles this year from Ho Chi Minh City. Amazon has been making Fire TV devices in Chennai, India. Several years ago, all of these products were made in China.
Geopolitical tensions, shutdown, and increased costs stirred Apple and other tech companies away from China
As per the report, like Apple, other tech companies are also moving out of China because of three main reasons: geopolitical tensions, shutdowns, and an increase in labor costs.
The shift is a response to growing concerns about the geopolitical tensions and pandemic-induced supply chain disruptions that have involved China in the last few years.
American companies are seeing more risk there — a perspective forged during the Trump-era trade war, with its tit-for- tat tariffs, and cemented by China’s saber-rattling after Speaker Nancy Pelosi’s visit to Taiwan last month. They fear that basing a supply chain largely in China may thrust them into the middle of its escalating conflict with the United States over Taiwan.
Furthermore, the annual income of manufacturing workers in China has risen by 3x in the past 10 years crossing $9,300.
Having said that, manufacturing in China will not come to an end but will shrink because it is still “by far, the most dominant consumer electronics manufacturer.” Mehdi Hosseini, a financial analyst at Susquehanna International Group who focuses on the tech supply chain said that “we have a long way to go to have the whole supply chain diversified outside of China.”
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