China must focus on innovation in manufacturing as wages rise, says Apple’s Cook

Tim Cook, the chief executive of Apple, said China must sharpen its edge as far as manufacturing innovation and advanced worker skills are concerned, as the country’s wage gap with low-cost markets continues to widen.

“China stopped being a low-cost manufacturing country many years ago,” Cook told the Fortune Global Forum in Guangzhou, capital of the southern Guangdong province, on Wednesday.

He said the key for China and other developing countries facing rising labour costs was advanced manufacturing expertise, which meant fostering a highly skilled workforce and building production processes that were “difficult to replicate elsewhere”.

Accelerating wage growth in China since the mid-2000s has increasingly raised the possibility of relocating jobs from export-oriented manufacturing industries in coastal cities to low-income countries in Asia and Africa, according to a study by the Centre for New Structural Economics at Peking University.

Workers’ salaries in China’s high-volume consumer electronics manufacturing sector have steadily grown this decade, as major global and domestic brands meet an increased demand for popular devices such as smartphones, high-definition televisions, headsets, tablets and laptops.

Apple, which is headquartered in California’s Silicon Valley, has all its major products – from the iPhone and iPad to MacBooks and AirPods – assembled in China by various contract manufacturers, including main supplier Foxconn Technology Group.

“Other companies may only focus on low-cost labour,” said Cook. “Our focus is on quality and innovation.”