Thread: Apple has Accelerated Plans for its Production Out of China and into Thailand

(CTN News) – China, the most important nation in the company’s supply chain, will no longer be the location of Apple Inc.‘s manufacturing.


To lessen the dominance of Foxconn Technology Group, suppliers are being instructed to prepare for migrations abroad in Asia, notably to India, Thailand, and Vietnam.


According to analyst Ming-Chi Kuo, the major manufacturing facility outside China for Apple’s next MacBooks may be Thailand. Kuo pointed out that all Apple’s MacBook Air and MacBook Pro models are presently built at plants in China.




Up to 300,000 employees at iPhone City, a sizable city inside a city in Zhengzhou, China, were engaged in violent demonstrations last week. iPhone City formerly produced about 85% of Pro iPhones.

According to Bangkok Post, Apple no longer feels comfortable having so much of its business tied up in one spot after a year of turbulence in China’s manufacturing industry.




Former US executive for Foxconn Alan Yeung remarked…


“In the past, nobody paid much attention to the hazards of focus. The standard was free commerce, and everything was relatively foreseeable. We’ve now stepped into a new realm.


Apple’s response is a larger pool of assemblers, even if some are still headquartered in China.
Apple wants its manufacturing partners to start attempting to undertake more of their work outside of China, the company has informed them.


However, deploying staff to new suppliers and nations has become challenging due to the weakening global economy.


Change won’t happen suddenly since Apple and China have spent decades forging a bond in a partnership that has mostly benefited both parties up until this point.


Every year, Apple releases new iPhone models and regular upgrades for its laptops, iPads, and other goods.


However, the transformation is already in motion due to two factors. Chinese teenagers are no longer keen to labor on manufacturing lines for little pay.


And even though many other nations have reverted to pre-pandemic standards three years after Covid-19 first began spreading, China is still attempting to contain outbreaks via the use of quarantines.


All of this comes after more than five years of escalating military and economic tensions between the US and China and US tariffs on Chinese imports.


In the long run, Apple wants to ship 40% to 45% of its iPhones from India, up from the present single-digit number.


According to suppliers, Vietnam is anticipated to handle a greater portion of the production of other Apple devices, including AirPods, smartwatches, and laptops.


For the time being, shoppers must endure some of the heaviest wait times for expensive iPhones.

Apple Has Accelerated Plans For Its Production Out Of China And Into Thailand

Core......

Whatever next

Bangkok iTRAIN to an appy ending

There are very sound reasons to diversify, in a geographical sense, one's manufacturing base as a large conglomerate. You will find this to be the case with Big pharma, auto manufacturing, the rag trade and many other industries. Going back to my MBA days, the challenge then becomes Quality Control.

Originally Posted by sabang

the challenge then becomes Quality Control.

And supply chain logistics coupled with costs.

The company I work for currently has moved all business out of China. While we had no manufacturing there, we had component suppliers and we spent time sourcing elsewhere. It has worked out well with no impact and I am happy I do not have to travel to China anymore.

Originally Posted by Stumpy

Originally Posted by sabang
the challenge then becomes Quality Control.
And supply chain logistics coupled with costs.

Not to mention staffing and training costs. Moving or establishing an operation in a new location is a very expensive business decision.

Originally Posted by Norton

Not to mention staffing and training costs. Moving or establishing an operation in a new location is a very expensive business decision.

It is Norts especially if you plan on a captive factory versus using a CM. Big factories aren't cheap plus staffing. It usually requires long stay expats to get it up and running effectively. All that drives product costs up albeit those finance folks some how hide it putting the costs in different buckets...

Originally Posted by sabang

Going back to my MBA days

I didn't know you played basketball in Mexico.

One wonders just how up to speed Apple are in understanding the quality of Asian labour markets.

Didn't Samsung bale out of Thailand and relocate manufacturing of their electronics to Vietnam because of the unreliability and poor educational levels of the Thai workers willing to stay in a factory.

Originally Posted by Stumpy

It usually requires long stay expats to get it up and running effectively.

It does. I was one and was well paid for years to reside in Bangers at company expense. Best job ever.

Originally Posted by Norton

It does. I was one and was well paid for years to reside in Bangers at company expense. Best job ever.

Yes. Same me. Going back to 2009. It has been the best job ever for me as well Norts. Like you, always been well paid and the companies cover all expenses. My current company is my 3rd company. Once you get established as an expat in a country you become a sought after candidate being you are already set up in the country. They do not need to pay a huge expat move package especially if it includes a wife and children.

Regardless though, setting it all up is an expensive proposition for companies because a new factory usually means Operations Management, Technical support, Facility Engineering especially if a semiconductor product. That doesn't include the people that will not be expats and air travel and accommodations.

Originally Posted by Seekingasylum

Didn't Samsung bale out of Thailand and relocate manufacturing of their electronics to Vietnam because of the unreliability and poor educational levels of the Thai workers willing to stay in a factory.

That happened, but the cause was simply lower production costs in Vietnam.

Your agenda is showing again.

So basically Apple will vacate their chinky factories and there they are, a ready made chinky knock off factory just waiting to churn out Appun Efones

Originally Posted by malmomike77

So basically Apple will vacate their chinky factories and there they are, a ready made chinky knock off factory just waiting to churn out Appun Efones

Foxconn campus and mfg facility is gigantic. Its doubtful Apple will leave entirely. Far to much invested with assets and to pull them out would require a full qual at the new location which means significant delays in product deliveries. A transition of this magnitude will take time to procure capital. I think they will likely remain diversified in China but establish the capacity in another location to turn up mfg if China continues to be problematic or leave at anytime. Right now China has Apple by the balls.

Vietnam is becoming a desirable location for manufacturing as is India. I was just in Hanoi looking at factory locations. Its has a very manageable infrastructure in place.

Originally Posted by Seekingasylum

the workforce is not sophisticated, is generally ill- educated and has to be supervised by foreign management

Probably the workforce sophistication in China is not much better than Thailand, if you are assembling circuit boards then manual dexterity is possibly more useful than education. I see the problem being at the supervisor level, local people who can manage the workers and convey management instructions accurately, this is where the skills shortage will be a challenge in Thailand. Having spent time in Thai secondary schools I am sure that the entire education system is unfit for purpose, it isn't going to be an easy ship to turn around and if they start yesterday it is a 10-year lead time to produce educated twenty-somethings ready for the workforce. They tried once, anybody else remember the massive, transformative project that was "Thailand 4.0"?
From my personal experience I have seen many intelligent and hard working students essentially fated to a limited future by an inadequate education system. It needs vast amounts of money, for infrastructure in schools and for teacher training and to police the budget so that school directors are not retiring as millionaires - if I were in charge I'd retire every director and tell the next tier that they'll lose their pensions if they follow the old ways. They also need languages, they need to fund the English and Chinese teaching so that the system produces people who can communicate with foreign managers.
It all feels too hard. I think India will be the big winner here.

For the hell of me I don't know why these multinational monster companies don't move their production back to the west where labour costs are not an issue anymore and they don't have to share their know-how with potential rip-off artists.

With the introduction of robotics and automation human content is greatly reduced to produce their products.

I've been involved with a number of companies that thought they needed to raise their company flags in places like China and more often then not they have been screwed.

Apple aka Timmy C is getting beat up in the US for dropping the airdrop function on Chinese iPhones. Evidently, Anti-Chinese demonstrators were using it to communicate in secret.

Originally Posted by cyrille

Your 'understanding' is, as ever, loaded with bile against your hosts, SA.

Lowest Labour Costs in ASEAN

1) Cambodia
2) Myanmar
3) Phils
4) Vietnam

http://https://m.phnompenhpost.com/business/vn-ranks-third-asia-lowest-operating-costs-cambodia-first

It was pretty much the same in 2015.

You're talking jaded, bile laden nonsense.

One thing that the lowest labor cost table doesn't show is the break out by sector. Cambodia, India and Vietnam are huge world garment product manufacturers. That uses base wages ( and likely slave labor unfortunately) with a very high assembly operator staff to management ratio. When you enter the technology sector those numbers change and while many of the jobs remain minimum wage the management and technical support ratio changes dramatically due to the certification requirements like IATF for automotive for example. That infrastructure commands a higher salary due to the educational requirements.

We are reviewing all this very closely as we look into launching next generations products. Thailand still has advantages over Vietnam but the gap is closing. Cambodia and Myanmar are out for a host of reasons.

I personally think, from what I am witnessing and have had discussion with colleagues in other companies, that the China model doesn't work like it used to and most have completely steered away from further investments there. Labor isn't the cheapest and COL in China is rising extremely fast. Plus China doesn't offer incentives for building and tax like Thailand, Vietnam, Cambodia etc.

Originally Posted by Loy Toy

For the hell of me I don't know why these multinational monster companies don't move their production back to the west where labour costs are not an issue anymore

Sadly LT, in the USA at least, labor costs are not favorable at all (at least in the high volume manufacturing sector). Look at minimum wage in the US. quite a few states are adopting the $15 an hour minimum wage and that does not include benefits. A basic entry level type manufacturing engineering position commands $60 to $70K a year ( That's entry level). A tenured engineer will be $125k to $150K. Middle managers are $100K. Then you have all these other hidden business costs like building lease, Human Resources, Safety engineers, Facility Engineers and the big one Lawyers on retainers. It is still significantly cheaper to offshore mature product assembly work.

A fine analysis from Stumpy whose understanding of the issues under debate is clearly sensible and perspicacious, whereas one could not possibly say the same for poor old Cyril.

I rather think I was a tad hasty in my earlier assessment of Stumpy which to be fair was more of a reaction to his daft comments supporting frazzled Septics whom I often skewer with my rapier wit. Nationalism can lead one into foolishness and Septics do seem prone to it.

Originally Posted by Seekingasylum

my rapier wit.

Just admire the modesty

Originally Posted by Buckaroo Banzai

Originally Posted by sabang
Going back to my MBA days
I didn't know you played basketball in Mexico.

Thanks for that I'd assumed it was a Melbourne Buggery Association or the Miildura Bowling Academy, I'm sure I've bumped onto him somewhere

It's all a trade off between automation and labour cost, the latter now has shelf life.

If a human being can assemble something a robot can do it faster and more accurately at a fraction of the labour cost.

Originally Posted by Seekingasylum

A fine analysis from Stumpy whose understanding of the issues under debate is clearly sensible and perspicacious, whereas one could not possibly say the same for poor old Cyril.

I rather think I was a tad hasty in my earlier assessment of Stumpy which to be fair was more of a reaction to his daft comments supporting frazzled Septics whom I often skewer with my rapier wit. Nationalism can lead one into foolishness and Septics do seem prone to it.

That's as close as it gets to sausages admitting he was a low level clerk in the mail room and wouldn't know his ass from a hole in the ground. Mailroom clerks don't get stationed as expats .