Wealth Management

Apple’s $44 billion drop shows growing cost of reliance on China

Bloomberg/Qilai Shen

  • share this article

US President Donald Trump ordered American companies to immediately start looking for alternatives to manufacturing in China, which is something Apple is thoroughly unprepared for.

Tuesday 27, August 2019

The world’s most influential consumer electronics company shed $44 billion of market value last week after a pair of pronouncements from Beijing and Washington cast a spotlight on its massive Chinese production base, from which almost all of the world’s iPhones are made, reported Bloomberg.

Apple’s main assembly partner, Foxconn Technology Group, has claimed that it has the capacity to build all of the Cupertino company’s US-bound iPhones outside of China, however, all indications are that to deploy it would require a great deal of time and money.

The president’s comments were followed hours later by tweets declaring that the US would increase the rate of existing and impending tariffs on Chinese goods. Trump’s moves were in response to an earlier announcement that China was planning to impose tariffs on $75 billion of US imports.

People familiar with iPhone production have said that it is nearly impossible to relocate manufacturing of Apple’s iconic device in a wholesale manner due to the difficulty of procuring a skilled labour force elsewhere, a point that Apple CEO Tim Cook has hammered away at in public as well.

The challenges of replicating the complex production lines and necessary infrastructure are also major hurdles.

There may also be less purely economic reasons for sticking with the world’s No 2 economy. Apple and its army of contract manufacturers, led by Foxconn, are collectively China’s largest private employer, providing work for millions of people.

A reduced Apple presence could have significant implications for the local job market and rub Beijing the wrong way at a time Chinese officials see a slowing economy as a significant risk to stability.

 

TAGS : Apple, US-China Trade tension, US President Donald Trump, Apple CEO Tim Cook

print this article