Inside Apple’s and Samsung’s Supply Chain Shift Away From China | WSJ
Summary
TLDRIn a significant shift, Samsung and Apple have relocated their smartphone manufacturing from China to Southeast Asia, primarily Vietnam and India. Driven by rising labor costs, geopolitical tensions, and pandemic disruptions, Samsung began this transition over a decade ago, while Apple accelerated its efforts following COVID-related protests at a major facility. Both companies are capitalizing on tax incentives and lower operating costs in these regions, with Apple aiming for 40-45% of iPhones to be made in India. This trend reflects a broader strategy among Western firms to diversify supply chains and mitigate risks associated with dependence on China.
Takeaways
- 📦 Samsung's smartphone manufacturing has shifted from China to Southeast Asia, primarily Vietnam and India, over the last 15 years.
- 💡 Samsung's early move to establish a plant in Vietnam in 2008 was a strategic decision to reduce dependence on China.
- 📉 Rising labor costs and competition in China led to a significant reduction in Samsung's workforce there, by 70% since 2013.
- ⚠️ The closing of Samsung's last phone factory in China in 2019 was influenced by U.S.-China trade tensions and tariffs.
- 🌍 Apple's manufacturing strategy also shifted away from China due to the COVID-19 pandemic and subsequent disruptions.
- 👷♂️ Apple faced significant unrest at its main iPhone manufacturing site in China, prompting a reevaluation of its supply chain strategy.
- 🇻🇳 Vietnam has become a key manufacturing location for both Samsung and Apple, with tax benefits attracting companies.
- 🇮🇳 Apple aims to manufacture 40-45% of its iPhones in India as part of its diversification strategy, significantly increasing from single digits in 2022.
- 📈 Samsung holds about 20% of the Indian smartphone market, while Apple seeks to expand its presence there, currently below 4%.
- 🛠️ Both companies are investing billions to establish more resilient supply chains and reduce reliance on China amid geopolitical tensions.
Q & A
What major change occurred in Samsung's manufacturing strategy from 2008 to 2023?
-Samsung relocated most of its smartphone manufacturing from China to Southeast Asia, particularly Vietnam and India, to reduce costs and geopolitical risks.
How did the COVID-19 pandemic influence Samsung's and Apple's operations?
-The pandemic highlighted vulnerabilities in supply chains tied to China, prompting both Samsung and Apple to diversify their manufacturing locations to avoid disruptions.
What were some of the benefits Samsung experienced by moving its operations to Vietnam?
-Samsung benefited from cheaper labor, insulation from geopolitical tensions, and protection from supply chain shocks during the COVID lockdowns.
What led to the decline of Samsung's market share in China?
-Rising labor and operating costs, coupled with increasing competition from domestic rivals, caused Samsung's market share in China to plummet.
What event in 2022 significantly impacted Apple's manufacturing strategy in China?
-Violent protests at Apple's largest iPhone manufacturing plant in Guangzhou due to delayed bonus payments prompted Apple to reassess its reliance on Chinese manufacturing.
What percentage of Samsung's smartphones are now produced in India?
-Approximately 20 to 30% of Samsung's smartphones are manufactured in India, as the company continues to expand its operations there.
How is Apple planning to increase its manufacturing presence in India?
-Apple plans to manufacture a portion of its iPhone models in India, aiming for 40 to 45% of its iPhones to be produced there in the long term.
What are some incentives that countries like Vietnam and India offer to attract tech manufacturers?
-These countries provide tax breaks, grants, and other incentives to encourage companies to relocate their manufacturing operations.
How does the shift in manufacturing strategies reflect broader trends in global supply chains?
-The shift indicates a larger trend of de-risking supply chains, where companies are reducing their reliance on China amidst rising geopolitical tensions.
Despite moving operations, why might Samsung and Apple still depend on Chinese suppliers?
-Both companies may still need to source critical components from China, as complete decoupling from the Chinese supply chain is challenging.
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