While most of the American companies are vying hard to get out of China, Apple, on the other hand, seems pretty relaxed. Is this intentional or Apple has been kept as a “corporate hostage” in China?
Apple’s CEO Tim Cook has invested capital in China in a lot of ways and now he cannot exit it all at one go. He has not effectively made decisions that has put not just the Apple’s customer but also the shareholders at risk. There are many other American companies, ranking quite lower than the Fortune 500 Apple, that are feeling the heat at the moment while operating from China.
Another unfortunate scenario adding fuel to fire is the current strained relationship status between China and the US. US President Joe Biden is looking to set up a date for talks with Chinese premier Xi Jinping but now the power dynamics have changed so much that Xi is not willing to have a conversation.
This is possibly also due to the current ongoing talks of banning TikTok in the United States, mostly due to the allegations of espionage. United States has given an ultimatum to ban TikTok on its soil unless the social media company’s Chinese owners divest their stakes in it.
Moreover, the TikTok’s Chief Executive Officer, ShouZi Chew, was grilled by the US Congress which has not gone down well with the officials sitting in China. Addressing the issue, China newly elected foreign minister Qin Gang said “If the US does not hit the brake but continue to speed down the wrong path, no amount of guardrails can prevent derailing and there surely be conflict and confrontation.”
Tim Cook recently visited China where he stated that Apple has a “symbiotic relation” for decades with China while addressing the China Development Forum in Beijing. He was stressing on the fact that almost all the products of Apple are being manufactured in China.
But whatever Tim Cook said at the Chinese Forum is not backed in actions. The strains in relations between China and Apple began to show when Foxconn, Apple’s Taiwanese partner manufacturing major products of iPhone, in accordance with Apple’s risk reduction plan, decided to develop alternative manufacturing hubs outside China. Foxconn Technology Group plans to invest about $700 million on a new plant in India to ramp up local production, depicting an obvious shift in Apple’s strategy to move manufacturing away from China as Washington-Beijing tensions escalates.
Experts believe that Tim Cook was forced to praise China at the China Development Forum, firstly, because it was a government organized event, and secondly, because Apple has earned almost 24 billion dollars in revenue from China in last quarter of
- But Apple’s ground reality is a bit different.Apple now is looking to diversify its manufacturing base and is moving closer countries such as India and Vietnam as an alternative manufacturing hubs.
Taiwanese Apple supplier such as Foxconn, Pegatron and Wistron have decided to expand their footprint in India with multiple factories being set up, which obviously is a huge boost to Indian Prime Minister Narender Modi’s open market policies. In return India has offered financial incentives to Apple suppliers such as Foxconn, which began making the latest generation of iPhones at a site in Tamil Nadu. Other Apple suppliers such as Wistron Corp. and Pegatron Corp. have already ramped up in India, while suppliers such as Jabil Inc. have begun making components for AirPods locally.
Another reason why Apple is looking for a China exit is the zero Covid policy that Beijing had implemented on the companies operating from its soil. Though China government repealed the controversial Covid policy after a mass protest but it greatly damaged business sentiments while in force. Apple felt the pinch of the draconian Covid policy when company’s supply chains were disrupted and its Zhangzhou Plant, one of the biggest in the world, faced massive protests with workers fleeing the site last November.
U.S. has been fighting with China on multiple grounds, TikTok, tariffs and Taiwan, to name a few. Therefore, Tim Cook understands that in current scenario Apple cannot exit China overnight and might have to rely of Chinese manufacturing capabilities for a long time. Apple is so helpless that even last year 90 percent of its manufacturing was done in China. Tim Cook here understands the he needs to keep his business running, and for that he has to keep visiting China and keep praising China.