Apple continues to diversify its supply chain away from China. At least this is what Reuters has recently suggested in its report that the iPhone 13 will now be produced in India. This will be Apple’s fourth smartphone model to be made in that country.
The Cupertino company’s supply chain moves are important. Here is what Apple stock (AAPL) – Get Apple Inc. Report investors should know about it.
Figure 1: Apple’s Latest Supply Chain Moves Are Good For AAPL Stock
Unsplash
(Read more from the Apple Maven: 3 Interesting Facts About Apple Stock In Q1 2022)
Apple is leaning less on China
Nearly two years ago, the Apple Maven explained that Apple’s supply chain was heavily dependent on China. Back then, I estimated that nearly half of Apple’s top suppliers were located in that Asian country.
To be clear, mainland China remains a crucial supply hub for the Cupertino company. But make no mistake: Tim Cook and his crew have made moves lately to diversify the company’s procurement channels away from China.
The chart below, drawn from Apple’s most recently published supplier list, shows the breakdown of supplier plants by country. Worth noting, the graph does not quantify how much each region contributes to Apple’s supply chain, whether in volume shipped or value added.
Figure 2: Location of Apple’s supplier facilities by main region, 98% of total spend.
DM Martins Research
Compared to the data that I published in June 2020, a few key changes stand out:
- Apple has become less China-dependent. Only about 39% of suppliers were located in the country last year vs. 48% in the previous 12-month period.
- Asian countries other than China, Taiwan and Japan have gained prominence: 28% of the total number of suppliers are located in places like South Korea, Vietnam and Philippines vs. only 17% in 2020.
- Suppliers located in Europe increased to 7% of the total, the same proportion of the United States or Taiwan, up from only 4% a couple of years ago.
- India has become a more important supplier for Apple, but so far only modestly. As of mid-2021, there were 10 of them located in the country, including iPhone assembler Foxconn in the southern state of Tamil Nadu, vs. 9 in 2020.
But what does it mean?
Apple’s supply chain diversification away from China is probably not a coincidence. Trade relations between the country and the US deteriorated in 2018, when both engaged in a trade war that resulted in not much more than higher import costs and stock market uncertainty.
By relying less on China, I believe that Apple strengthens its supply chain — something that has become even more important during this post-pandemic period of disruptions. The favorable impact could include more product availability and, possibly, cost stability.
I believe that strong supply chain management is one of the reasons to be bullish on Apple stock. For now, the data continues to suggest that the Cupertino company has been doing a good job on this front.
(Read more from the Apple Maven: How Apple Stock Has Benefited From Margin Expansion)
(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting The Apple Maven)
