For years, eight words were stamped on the back of every iPhone: “Designed by Apple in California. Assembled in China.” The slogan illustrated the tech giant’s two power bases: its headquarters in Silicon Valley and the manufacturing giant it had become in the factory of the world.
Apple no longer lists the words on the back of the iPhone. When the company launched a new supplier transparency website earlier this month, the phrase was updated: “Designed by Apple in California. Made by people everywhere.”
Apple is gradually breaking away from China as the long-standing and mutually beneficial relationship between the corporate giant and the country begins to falter.
Data published by the company last week outlining its relationships with hundreds of component and material suppliers showed that China, while still the tech giant’s largest source of suppliers, is slowly but surely going elsewhere.
Last year, 156 of the 465 manufacturing sites used by Apple suppliers were in China – 33.6%. This was down from 35.2% and 36.4% in 2022 and 2021 respectively, and 46% five years earlier. The company is increasingly dependent on supply chains in countries such as Vietnam, Taiwan and South Korea.
The enormous factories where those parts are processed into finished Apple products are largely located in China. But that too is changing.
According to JP Morgan, Apple assembled only 5% of iPhones and other gadgets outside of China in 2022. However, the company hopes to produce a quarter of iPhones in India next year. Last year’s new iPhone models were the first to be manufactured in both India and China from launch day.
Apple isn’t alone in trying to move production out of China. Extended Covid lockdowns there in 2021 and 2022, as well as political pressure, have pushed manufacturers to look elsewhere. The American Chamber of Commerce in Shanghai found that last year a fifth of US companies operating in the country wanted to move production abroad, and two-fifths wanted to redistribute investments originally planned for China.
But Apple’s move is symbolic. The company has been a totem of ‘made in China’ for almost a quarter of a century and Tim Cook, its CEO, is seen as the architect of that strategy.
The shift isn’t just about manufacturing: Apple is also facing growing concerns about its own operations in the country.
According to figures from research firm Counterpoint, Apple lost its position as the market leader in smartphone sales in China in the first quarter of the year, falling to third place behind domestic manufacturers Vivo and Honor.
The share of the Chinese smartphone market fell 19.1% to 15.7% – the lowest level since 2020.
The company has come under pressure from a resurgent Huawei, whose smartphone business was near death but has become a national champion after overcoming US sanctions to develop advanced microchips. Apple’s position isn’t helped by Beijing telling government employees not to use iPhones and other foreign devices.
On Thursday, Apple is expected to release quarterly results that confirm the concerns. Analysts predict the company will report sales of $15.9 billion (£12.8 billion) in China, down 11% year-on-year and the third consecutive quarterly decline.
Worries about Apple’s troubles in China have sent the tech giant’s stock price down about 11% so far this year, wiping more than $300 billion from its market value.
There are more clouds on the horizon. China is becoming an increasingly assertive online regulator, ordering Apple to remove WhatsApp and Meta’s Twitter rival Threads from the country’s App Store earlier this month.
A U.S. bill to ban Chinese app TikTok, signed last week by President Joe Biden, could increase pressure on Beijing to respond accordingly, perhaps by punishing a U.S. company like Apple.
Donald Trump, meanwhile, has said he will impose more tariffs on Chinese imports if he wins next year’s election. The iPhones still being assembled in China are at risk of running afoul of these rules.
If pressure mounts on Apple to move abroad more quickly, it wouldn’t be easy, said Mark Zetter, an electronics industry consultant.
“There is currently nowhere else on earth that has the dynamism and supply chain infrastructure that China has. I don’t see that happening in my lifetime that one destination will compete with China,” he says.
For his part, Cook has tried to keep the peace. “There is no supply chain in the world that is more important to us than China,” he told state newspaper China Daily during a recent trip to the country. It will remain that way. But little by little, Apple is reducing its dependence on China.
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