Apple CEO Tim Cook has wrapped up his latest Asian trip, one that is being described as the most extensive Southeast Asia trip in years.

Visits to Vietnam, Singapore and Indonesia have featured itineraries that included meeting with governmental leaders, technology users, content providers and other groups.

From a supply chain sourcing perspective, a consistent theme in media reporting has been exploration or hints for added Apple supply chain sourcing.

 

Vietnam Visit

Cook’s Vietnam visit was headlined by local and global media as pledging to buy or produce additional product components in that country.

According to a published report from global news site CNN, the consumer electronics icon has invested upwards of $16 billion in production sourcing since 2009, with the equivalent of fostering more than 200,000 jobs. Production currently sourced include products such as iPad, AirPod and the Apple Watch.

Reports cite Cook as indicating Applestands ready- to enhance cooperation and investment activities” within this country. The report indicates that Apple’s increased activity in the country underscores a “trend among global tech firms to look beyond China to secure their supply chains, cut costs and open new markets.” A further attraction brought forward in the report is this country’s population of 100 million people, with a “booming, educated and youthful population” not only for future product consumption but also factory employment.

In a prior Supply Chain Matters published posting, we highlighted industry reports indicating that Apple current production investment within India is now upwards of $15 billion.

 

Indonesia Visit

The Wall Street Journal reported this week (Paid subscription) that on his visit Cook indicated that “Apple will consider making some of its products in Indonesia.

The statement reportedly came after meeting with the country’s President Joko Widodo. Reportedly, Mr. Cook did not provide a timeline for such an investment since the company has no supply chain investment within this country at this time.

A report from Reuters indicates that while Apple has no manufacturing facilities in the country, the company has been setting up application developer academies which qualify for localized investment for the selling of products within Indonesia.

Apple is not the only tech company reportedly being wooed by this country. Tesla has expressed some interest in supply chain production presence. The CEO of Microsoft could reportedly be visiting the country at the end of this month.

 

Other Asian Regions

Last November, Thailand’s Prime Minister met with Cook during the Asia Pacific Economic Cooperation summit held in that country. Reportedly Cook provided a follow-up communication acknowledging that Thailand has the potential and is well equipped for future cooperation.

 

Supply Chain Matters Perspectives

As business and supply chain strategists are aware, global wide sourcing seeks to address different business needs.

Doing business globally requires access to specific domestic markets and that can include brand or product recognition, reputation or other factors. For many countries, particularly Asian nations, access to a specific market can come with thresholds related to localized spending and/or employment commitment.

Sourcing of supply network components can address needs for lower cost manufacturing, the leveraging of existing industry supply networks or for added resiliency in global supply chain sourcing.

Apple has been a master at exercising many such strategies.

China was once Apple’s go to center for low cost manufacturing coupled with broad and deep supply network and logistics infrastructure capabilities. This region’s capabilities are obviously not solely low cost, but rather high flexibility and efficiency. Thus, Apple’s most premium and functionally laden iPhones provided considerable hardware profit margins.

The Covid-19 pandemic changed that paradigm as Apple discovered that having the largest iPhone production facility on the planet in one specific country can be a vulnerability.

What is further changing is evidence of backlash in the China market because of increased trade tensions between China and the U.S., and because domestic smartphone providers have been rather aggressive in matching product functionality at a lower cost. According to data from Counterpoint, Apple’s share of the Chinese smartphone market dropped to 15.7 percent compared with second place in the year-ago period.

Of late, Supply Chain Matters has been highlighting for readers Apple’s China Plus sourcing actions, of which India and Vietnam are the prime recipients.

Is iPhone U.S. Production Foreseeable?

These latest overtures for new sourcing activities can be interpreted in many dimensions. They are likely to be making efforts to focus on new or emerging growth markets across Asia. For smartphone providers, hardware sales are the facilitator of higher margin content and services revenues.

What remains perplexing, from our lens, is the existing U.S. market where the latest and greatest iPhone model is cherished.  With ongoing announcements related to the return of advanced semiconductor processor fabrication production returning to U.S. domestic production, we would speculate that this would provide the opportunity for at least a discussion as to whether Apple would be inclined toward a domestic or near-shored iPhone production presence.

While CEO Cook may be a frequent invitee at White House dinner events, should there at least be a conversation about providing iPhone jobs within the U.S.?

Any added viewpoints out there?

 

Bob Ferrari

© Copyright 2024, The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.