Apple and Samsung have their own strategies to move manufacturing away from China. In the swirling currents of our global economy, two industry titans—Apple and Samsung—are rewriting their playbooks. By shifting their manufacturing operations away from China, they’re reshaping the future of global supply chains. The strategies and trajectories of these two giants have profound implications not only for their businesses but also for the broader technology landscape.
A Strategic Leap: Samsung’s Forward-Thinking Approach
In 2008, Samsung’s smartphone manufacturing facilities were spread across mainland China. Fast forward to today, these factories have largely relocated to Southeast Asia. Samsung’s strategic foresight to establish a plant in Vietnam’s Bac Ninh region in 2008 has proven to be a boon. It enabled Samsung to reduce its reliance on China and insulate itself from supply chain shocks and geopolitical tensions.
Here are the critical outcomes of Samsung’s relocation strategy:
- Reduced costs: Lower labor costs in Vietnam provided a competitive edge.
- Supply chain resilience: The move insulated Samsung from supply chain disruptions seen during the COVID lockdowns in China.
- Circumventing tariffs: By moving smartphone operations out of China, Samsung shielded itself from the Trump-era tariffs on Chinese-made goods.
By 2019, Samsung shut its last phone factory in China. However, the company retained significant manufacturing centers for its expansive memory chip business.
Apple’s Shift: Triggered by Geopolitical and Operational Disruptions
Meanwhile, Apple’s path to diversification began later, gaining momentum due to disruptions brought about by COVID-19 and social unrest. Violent protests at its largest iPhone manufacturing plant in Guangzhou, China in late 2022, coupled with strict Chinese COVID policies, expedited Apple’s decision to reduce its dependence on Chinese manufacturing.
Parallel Destinations: India and Vietnam
Despite different triggers, both Apple and Samsung are converging on the same geographical targets: India and Vietnam. These countries, offering tax breaks and incentives, have become the new hubs of smartphone manufacturing.
- Vietnam: Samsung now produces half of its smartphones in Vietnam, enjoying a reduced corporate income tax rate of 10% compared to China’s standard 25% rate. Apple has also started moving some iPad manufacturing to Vietnam.
- India: Around 20-30% of all Samsung smartphones are now manufactured in India, according to Morgan Stanley. The company has opened the world’s largest mobile phone factory near New Delhi. Apple is not far behind, planning to manufacture a portion of its iPhone 14 models in India for the first time.
These strategic shifts are reshaping both companies’ market positions, and potentially, the balance of economic power in the region.
Resilient Supply Chain: The End Goal
Manufacturing diversification goes beyond tax breaks and cost savings. It’s about supply chain resilience. Tech analysts argue that manufacturing iPhones in India and selling them to the Southeast Asian market ensures a smooth, resilient supply chain.
Apple’s longer-term goal is to ship 40-45% of iPhones from India, according to supply chain analysts. The company is also exploring manufacturing closer to home through a multi-billion-dollar deal with US chipmaker Broadcom.
The Challenge of Complete Diversification
However, achieving full supply chain diversification is complex. During the height of the 2020 COVID-19 outbreak in China, Samsung found itself scrambling to secure suddenly scarce Chinese components. This shows that despite significant diversification efforts, these companies still heavily depend on Chinese suppliers.
The De-risking Trend: An Ongoing Evolution
The moves by Samsung and Apple signal a larger trend towards de-risking, akin to diversifying a portfolio. Western companies see China as a riskier place to operate due to escalating US-China tensions. This perspective is driving them to think about doing less in China.
Concluding Remarks
In this dynamic landscape, the recent shifts by Samsung and Apple illuminate an important lesson. The need for diversification, resilience, and strategic foresight cannot be overstated. These companies’ moves exemplify proactive measures to navigate a changing global market.
I highly recommend you watch the full video “Apple vs. Samsung’s Strategies to Move Manufacturing Away From China” from WSJ to glean more in-depth insights into these strategic decisions and their implications. It’s not just about Apple and Samsung; it’s about understanding the evolving narrative of the global economy.
Sources:
- Apple vs. Samsung’s Strategies to Move Manufacturing Away From China | WSJ – YouTube
- Morgan Stanley
- Broadcom
Reference
YouTube Video: Apple vs. Samsung’s Strategies to Move Manufacturing Away From China | WSJ