Apple suppliers’ China exodus not to slow down under Biden

Bloomberg

The splintering of the global tech supply chain that began during President Donald Trump’s watch looks set to persist under his successor.
Apple Inc, the largest of the many tech giants that rely on Chinese factories to make their gadgets, will move some production of its iPads and
MacBooks to Vietnam. Key assembly partner Hon Hai Precision Industry Co, known also as Foxconn, has allocated $270 million in new investments to the Southeast Asian country. Those moves presage a larger and longer-term migration that may have ramifications for the iPhone maker as well as China’s role as workshop to the world.
Foxconn founder Terry Gou coined the term “G2” to describe the trend of a unified supply chain splitting into at least two. Company Chairman Young Liu said in August that the likes of India, Southeast Asia and the Americas could each in the future end up with a dedicated manufacturing ecosystem of their own. The trend now looks irreversible as other countries including India and Vietnam are boosting their infrastructure and efforts to lure manufacturers through lower costs and fewer geopolitical worries.
“As China gets more expensive, and as US politics have been unpredictable, companies have shifted production of some goods out of China. That trend will continue as China gets
more expensive and as Vietnam and India improve their competitiveness,” said Dan Wang, a
technology analyst at Gavekal Dragonomics.
Trump’s trade hostilities against China caused many manufacturers to shift production capacity to neighbouring countries like Vietnam and further afield to sites in Mexico and India, in order to avoid being slapped with punitive tariffs and to mitigate future sanctions risk. Apple, whose CEO Tim Cook orchestrated the creation of its current Chinese-centric production chain, has resisted a large-scale move but in recent years has increasingly explored alternatives.
The Cupertino, California-based company is continuing to add iPhone capacity in India through its assembly partners, aided by PM Narendra Modi’s policy to attract top-tier smartphone companies to make their gadgets locally for export. Pegatron, the last of the major iPhone assemblers to arrive in the country, announced earlier this month it is injecting 11 billion rupees ($150 million) into its Indian unit and will start production there as soon as late 2021.
Back at home, the iPhone maker has been lobbying the
US government to support local chip production with tax breaks. Its key supplier Taiwan Semiconductor Manufacturing is planning a chip fab in Arizona, though the modest scale and technology of that facility would suggest it will service smaller customers, at least to begin with.
Beyond Apple, Alphabet Inc’s Google has placed orders with Foxconn to assemble key components for its servers in Wisconsin, at the under-utilised facility that has to date been most famous for what it hasn’t produced. Mass production there is expected to go ahead in the first quarter. Trump’s tariffs on Chinese-made products have also forced other global companies to rethink their manufacturing operations.