Apple adds six Chinese suppliers, but cuts seven mainland contractors in gradual move to diversify its manufacturing network

Mainland China remains the US tech giant’s primary production base, where about half of factories run by its top 190 disclosed suppliers are located
Apple’s latest supplier listing signals a gradual move to diversify its manufacturing network beyond China to countries like India and Vietnam

Apple

Yaling Jiangin ShanghaiandJiaxing Liin Hong Kong

Published: 11:00pm, 4 Oct 2022

Why you can trust SCMP

Apple added six new Chinese suppliers and cut seven previous contractors on the mainland during its past financial year to September, signalling the iPhone maker’s slow and gradual move to diversify its manufacturing supply chain in Asia.

Mainland China remains the US tech giant’s primary production base, where about half of the factories run by its top 190 disclosed suppliers are located, according to a South China Morning Post analysis of the firm’s contractor list for its financial year ended September 25, 2021.

Apple’s latest published supplier list represents 98 per cent of the company’s direct spending for materials, manufacturing and assembly worldwide. Data on each supplier’s monetary value and production capacity was not disclosed.

The latest listing reflects how Apple has moved to diversify its supply chain beyond China to countries like India and Vietnam, as Covid-19 lockdowns on the mainland disrupt manufacturing activity and growing tensions between Beijing and Washington further unsettle business in the world’s second-largest economy.

01:48

Apple fans in China queue up to buy iPhone 14 as new models hit stores

Apple’s latest supplier list also marked a sharp contrast with its previous preferences from 2017 to 2020, when nearly one-third of contractors were from mainland China.

New mainland Chinese suppliers added by Apple in its past financial year included Inner Mongolia-based Baotou INST Magnetic New Material Co, which designs and manufactures rare earth magnetic material application devices; electronic connectors maker Shenzhen Linkconn Electronics Co; and Jiangyin Kangrui Molding Technology Co, based in eastern Jiangsu province.

Another new addition was Shanghai-listed Wingtech Technology Co, which is a semiconductor and communications integrated device manufacturer.

The seven Chinese firms that have lost supplier status with Apple included Shenzhen-listed Ofilm Group, which is engaged in the manufacture and distribution of optical and optoelectronic components.

Apple dropped Ofilm as a supplier in March last year after it was added to Washington’s trade blacklist over alleged involvement in a government programme that transferred ethnic minorities from Xinjiang to work at the company’s factories.

How supply chain politics could mean misery for thousands of Chinese workers

That allegation, if proven true, would breach Apple’s Supplier Code of Conduct. This code is based on internationally recognised human rights, as set out by the United Nations and the International Labour Organization.

Neither Apple nor Ofilm, which is based in the eastern city of Nanchang, has commented on the forced labour allegation.

While Apple’s supply chain diversification efforts have gathered speed this year, analysts expect the US tech giant to continue working closely with mainland Chinese producers for the foreseeable future.

“Apple may reduce production in mainland China and increase [manufacturing] in India and Vietnam, but it still has close ties with mainland producers [that are part] of its supply chain,” said Eddie Han, manager at Taipei-based Isaiah Research.

01:48

Apple fans in China queue up to buy iPhone 14 as new models hit stores

A number of mainland Chinese suppliers are already expanding supply chain partnerships with Apple, according to Han.

Those include Beijing-based BOE Technology Group for organic light-emitting diode panels and Hong Kong-listed smartphone camera module and lens maker Sunny Optical Technology, which is headquartered in eastern Zhejiang province.

While Apple seeks to reduce reliance on mainland Chinese assembly lines, the company still counts on a number of long-term Chinese suppliers such as Luxshare Precision to offset risks during this shift, according to Ivan Lam, a senior analyst at Counterpoint Research.

“Apple has an extremely high demand for product quality,” Lam said, adding that continued work with long-term Chinese partners enables the US tech giant to reduce uncertainty.

Apple’s iPhone sales make up half of China’s high-end smartphone market

Some major Apple suppliers that only ran factories on mainland China years ago have expanded their operations in other countries.

Shenzhen-based earphone maker INB Electronics, for example, has established operations in northern Phu Tho province in Vietnam. Taiwanese lens maker Genius Electronic Optical has added a new plant in Taichung City in the island, to complement its operations in southeastern Fujian province.

California-based Boyd Corp, an energy management and environmental sealing solutions provider, added new plants in the state of Chihuahua in Mexico and in the Midwestern US state of Wisconsin, while continuing to run its factories in southern Guangdong and eastern Jiangsu provinces.

Apple’s new Chinese suppliers and manufacturing locations:

Baotou INST Magnetic New Materials Co (Inner Mongolia)
Beijing Zhong Ke San Huan High-Tech Co (Zhejiang)
Crystal-Optech Co (Zhejiang, California)
Jiangyin Kangrui Molding Technology Co (Jiangsu)
Shenzhen Linkconn Electronics Co (Jiangsu)
Wingtech Technology Co (Yunnan, Zhejiang)

Suppliers removed from Apple’s list and their locations:

Golden Arrow Printing Co (Jiangsu)
Jinlong Machinery & Electronics Co (Guangdong)
Selen Science & Technology Co (Jiangsu)
Suzhou Victory Precision Manufacture Co (Jiangsu)
Suzhou Xinjieshun Hardware Machine Electricity Co (Jiangsu)
Jones Tech (Jiangsu)
Ofilm Group (Guangdong, Jiangxi)

Post