In the coming months, Apple will be making some of its flagship iPhone models outside of China for the first time. It’s a small but significant change for a company that has built one of the most sophisticated supply chains in the world with the help of Chinese authorities. But the development of the iPhone 14, which should be revealed this Wednesday (7), shows how complicated it will be for Apple to really get rid of China.
More than ever, Apple’s Chinese employees and suppliers have contributed complex work and sophisticated components to the 15th year of its flagship device, including design aspects of manufacturing, speakers and batteries, according to four people briefed on the new developments. operations and analysts. As a result, the iPhone went from being a product designed in California and made in China to being a product of both countries.
The critical work provided by China reflects the country’s advances over the past decade and represents a new level of participation by Chinese engineers in iPhone development. After luring companies into their factories with legions of low-cost workers and unparalleled production capacity, the country’s engineers and suppliers have moved up the supply chain to claim a bigger share of the money American companies spend to create high-tech gadgets.
The growing responsibilities China has taken on for the iPhone could threaten Apple’s efforts to lessen its dependence on the country, a goal that has gained greater urgency amid rising geopolitical tensions over Taiwan and smoldering concerns in Washington over China’s rise as a technology competitor. .
Chinese companies with operations in India will still play a key role in Apple’s plan to make some iPhones in the country. In Chennai, India, Taiwanese supplier Foxconn, which already makes iPhones in factories across China, will lead the assembly of the device by Indian workers with support from nearby Chinese suppliers, including Lingyi iTech, which has subsidiaries to supply chargers and other iPhone components, according to two people familiar with the plans. China’s BYD is also setting up operations to cut glass for displays, these people said.
“They want to diversify, but it’s a difficult path,” said Gene Munster, managing partner at technology research firm Loup Ventures. “They are very dependent on China.”
Apple declined to comment. Foxconn, BYD and Lingyi iTech did not immediately respond to requests for comment.
Covid-related outages have exacerbated Apple’s situation. When China closed its borders in 2020, Apple was forced to overhaul its operations and abandon the practice of transporting hordes of engineers from California to China to design the assembly process for flagship iPhones.
Rather than subjecting staff to lengthy quarantines, Apple has begun training and hiring more Chinese engineers in Shenzhen and Shanghai to lead critical design elements of its best-selling product, according to the four people briefed on the operations.
The company’s product design and manufacturing teams began having late-night video calls with colleagues in Asia. After travel resumed, Apple tried to encourage its staff to return to China by offering a $1,000-a-day stipend during their two-week quarantine and four weeks on the job, these people said. Although the payout could be as high as $50,000, many engineers were reluctant to go due to uncertainty about how long they would have to quarantine.
In the absence of travel, the company encouraged employees in Asia to conduct meetings previously led by their colleagues in California, these people said. They also took responsibility for selecting some Asian suppliers of future iPhone parts.
The company is now increasingly turning to China to supply high-paying workers for these jobs, these people said. This year, Apple posted 50% more jobs in China than it did in 2020, according to GlobalData, which tracks hiring trends in the technology sector. Many of these new hires are Chinese nationals who studied in the West, according to these sources.
The change in the way Apple works has coincided with an increase in the number of Chinese suppliers it uses. Just over a decade ago, China contributed little value to the production of an iPhone. It mainly supplied the low-cost workers who assembled the devices with components shipped from the US, Japan and South Korea. The work accounted for about $6 — or 3.6 percent — of the iPhone’s value, according to a study by Yuqing Xing, an economics professor at the National Institute for Policy Studies in Tokyo.
Gradually, China trained local suppliers who began to replace Apple’s suppliers around the world. Chinese companies began to manufacture speakers, cut glass, supply batteries and manufacture camera modules. Its suppliers now account for more than 25% of the value of an iPhone, according to Xing.
The gains illustrate how China has expanded its dominance in the smartphone supply chain, said Dan Wang, an analyst at Gavekal Dragonomics, an independent economic research firm. “This trend is not slowing down,” he said.
Translated by Luiz Roberto M. Gonçalves
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