In fresh years, we have seen an intensification of tensions on the US-China line that affect the strategical decisions of major technology corporations. Apple, a symbol of American innovation, has long based its production on Chinese factories – as many as 90% of iPhones and many another products of the company are being produced in China. However, in view of the possible return of Donald Trump's protectionist policy, the company began to consider diversifying the supply chain, moving any of its production to countries specified as India and Vietnam.
China vs. relocation: barriers and incentives
China, aware of the plans of American giants, has taken action to halt the largest technology corporations in its territory. The Beijing government offers attractive financial incentives, reduced taxation and investment in infrastructure to make the country an indispensable link in the global supply chain.
In addition, Beijing introduces regulations and bureaucratic procedures to impede the fast relocation of production. For example, the availability of export licences has been reduced for companies that plan to relocate their production.
Position of Apple and Tim Cook
Tim Cook, Apple's CEO, frequently stressed China's importance to the company. In 1 of his last interviews, he stated: “China is not just a mill in the world. It is simply a marketplace where we invest and with which we want to build a lasting relationship." At the same time, Cook pointed out that Apple would effort to diversify its supply chains, but China would stay their key partner.
Production in China is based on an highly developed supplier base and its transfer to another location is costly and time consuming. Moreover, China is 1 of the most crucial outlets for Apple products, which further complicates relocation decisions.
What happens to the global supply chain?
Faced with possible escalation of the US's fresh administration's tough policy towards China, technology corporations are in a hard position. On the 1 hand, they want to defend themselves against possible sanctions and duties, on the other, they cannot ignore the importance of the Chinese marketplace and infrastructure.
China effectively inhibits attempts by technological giants specified as Apple, offering attractive conditions and hindering relocation. The decisions taken by corporations in the coming months may specify the future of global supply chains for the next decades.
Source: Nikkei Asia
Leszek B. Glass
Email: [email protected]
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