China trying to slow Apple's supply chain expansion in India, Vietnam, blocks critical materials & machinery

Apple’s efforts to shift its supply chain away from China are hitting some roadblocks, as the Chinese government tightens controls on critical materials and high-tech equipment, as per a report by Asia Nikkei. For years, China has been the backbone of Apple’s manufacturing operation, offering low labour costs and a well-established infrastructure.  

But with rising labour costs, ongoing trade tensions, and pandemic disruptions, Apple started looking elsewhere. The company moved production to India and Vietnam, both of which offer lower costs, helpful trade policies, and easy access to fast-growing markets, in an initiative called China Plus One.

India has quickly becoming a major hub for iPhone assembly, tapping into its large, affordable workforce and government incentives. Vietnam, on the other hand, has become a key location for AirPods and other accessories, thanks to its growing electronics industry and quick adoption of Apple’s strict manufacturing standards. However, China isn’t taking Apple’s shift lightly.

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China’s Response to Apple’s China Plus One

In response to Apple’s growing move away from its shores, China is clamping down on the export of critical materials that Apple needs, like rare earth minerals and advanced manufacturing equipment. This move is seen as an effort to protect its place as a global manufacturing leader and prevent companies like Apple from pulling out, as per the Asia Nikkei report. The US has used similar tactics in the past, like restricting semiconductor exports, to maintain its tech dominance.

For China, losing Apple is more than just an economic blow. Apple has played a huge role in solidifying China’s status as a tech powerhouse, and a shift away from the country would be a huge symbolic loss. If other companies follow Apple’s lead, it could weaken China’s grip on the global manufacturing landscape.

Why Apple moved away from China

For Apple, diversifying its supply chain is a smart move. Spreading production across different countries reduces the risk of problems like trade wars, natural disasters, or pandemics causing major disruptions. It also gives Apple better access to growing markets. By making products in places like India, Apple can avoid heavy import taxes, making its goods more affordable for local customers.

Having operations in several countries also gives Apple more bargaining power with suppliers and governments. The company isn’t tied to one location, which means it’s less vulnerable to changes in trade policies or sudden disruptions. If one country imposes tariffs or faces an issue, Apple can simply shift production elsewhere, keeping things running smoothly.

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The challenge of complete independence from China

Even with its push to diversify, Apple still relies heavily on China. Rare earth minerals, which are essential for components like batteries and magnets in iPhones, are still mostly sourced from China. Plus, high-precision tools used in Apple’s manufacturing process are still made there. This means it’s nearly impossible for Apple to completely cut ties with China, at least for the foreseeable future.

While Apple has made significant strides in spreading its production out, its reliance on Chinese-made components means that even a small delay in shipments could cause a disruption elsewhere. Apple’s challenge is finding the right balance — maintaining flexibility and resilience in its supply chain, while still relying on China for those critical components. For China, keeping Apple’s business is key to maintaining its economic power and status as a tech leader.