The success of the iPhone makes it difficult for Apple to leave China

Tram Ho

President Trump’s new tax policy is putting American technology firms and consumers at a standstill. While Google recently announced it would shift production to Vietnam and Thailand, Apple has yet to make a move that it is ready to leave China, although Apple plans to move 30 earlier this year. % of manufacturing facilities are out of this country. Vietnam is one of the areas where Apple is expected to lay production lines, but this can’t happen overnight: Apple needs more time to find new supply chains and train workers.

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An Apple store in Beijing

Apple has an incentive to move production lines out of China, starting on December 15, iPhones are among the products subject to 15% tax when imported into the US. President Trump has postponed the taxation because he did not want to affect sales during the year-end shopping. However, Apple Watch and AirPods are still taxed at 15% since September 1. Apple is likely to bear all or part of the tax on its own or in part to consumers – raising the price of its products. But looking at iPhone sales in the second quarter of 2019 dropped 14% from the same period last year, the likelihood of Apple paying all the taxes is very high.

The success of the iPhone left Apple stuck in China while Google exited

Apple has a small number of iPhones manufactured in India, which is done when it intends to hit this billion-dollar market. And despite being the world’s second-largest smartphone maker market, India is still a developing country, so Apple wants to avoid import duties so consumers here can buy iPhones.

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CEO Tim Cook visits an AirPods manufacturing facility

But what many people fear most when the iPhone price is increasing year by year is that the technology giant is too dependent on factories in China. According to information from Reuters, instead of bringing the factory out, Apple is doing the opposite – that is to add more production lines here. Apple’s main manufacturing partner, Foxconn, expanded its scale from 19 factories in 2015 to 29 factories in China this year. Pegatron, the company in charge of assembling for Apple, also increased from 8 to 12 factories during that time. Data on Apple’s supply chain also shows it is dependent on China. In 2015, there were 49.9% of Apple suppliers in China, this figure in 2019 was 47.6%.

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The success of the iPhone generations made Apple increasingly dependent on China

CEO Tim Cook once said, “Every part of Apple devices is made everywhere. Only a few components are made in the US and most are made in Japan, South Korea, China and Europe. We will continue to maintain this production in the future. ”

In case you are wondering why Google can easily move Pixel production to Vietnam and Apple cannot, the problem still lies in sales. Despite doubling the number of Pixel devices assembled this year, Google still only produces 8 to 10 million products. While only Apple iPhone sales in the second quarter of 2019 were 39 million units. So it’s understandable that Apple needs a bigger supply chain for the companies it trusts and produces the best quality products.

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Familiar queues for each new iPhone launch

But perhaps Apple has no other choice but to keep factories in China because according to the results of the investigation: very few places are able to ship 600,000 phones a day – like Apple is doing in China. So it can be said that the success of the iPhone kept Apple in China, despite disputes and trade sanctions of the two countries.

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Source : ictnews