China is important to Apple in two ways. The first is for manufacturing, and the second is for sales. So far, the corporation has negotiated the tit-for-tat tech battle between the US and China admirably. However, it has expanded its reliance on the country in the process.
Despite deteriorating US-China ties, Chinese sales are now nearly half that of Apple’s “Americas” market, up from slightly more than a third in 2019. This week, Apple increased its revenue by selling its products on the online store of popular Chinese social media site WeChat.
Apple, like Tesla, is a US corporation that outsells domestic competitors thanks to price decreases. The emphasis makes sense. China is the world’s largest smartphone market, as well as the world’s largest market for electric vehicles. Even if phone sales fell last year, Apple’s sales increased. According to Counterpoint analysis, Apple’s iPhones accounted for 18% of all Chinese cellphones sales in the first half of June.
Meanwhile, Apple is attempting to demonstrate to the United States that it can untangle its supply chain from China and bring manufacturing back to the United States. In 2018, it announced plans to spend $350 billion in the US economy, which were later increased to $430 billion. This proposal includes a recent agreement with Broadcom to manufacture 5G phone chips in US states.
The frequent Covid-19 lockdowns in China have increased interest in alternate production sites, particularly in India. However, complete diversification away from China remains a pipe dream. According to IDC data, Apple still manufactures more than 90% of iPhones in China. It’s also worth noting that Luxshare, a Chinese contract manufacturer, is assembling its newest product, the “mixed reality” Vision Pro headset.
Nvidia and other US technology companies have cautioned that US measures that restrict Chinese access to US technology risk harming American enterprises. This year, the Chinese Cyberspace Administration prohibited major infrastructure operators from purchasing chipmaker Micron’s goods, for example. In response, the Idaho company announced increased investment in Chinese manufacturing.
China serves as both a customer and a supplier to the United States. Washington cannot adjust its relationship with one without affecting the other. Neither can Apple. When it comes to exiting China, the company’s best hope is to stick to its all-talk, no-action strategy.
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