Contrary to earlier reports, Apple is shifting the production of some of its devices from the US to China to save costs from shipping parts to-and-from the US.
Is Apple moving production out of the US?
Recent reports suggest that Apple’s newest Mac Pro will move its final assembly from Austin, Texas —where its previous version was assembled — to China. Apple will now partner with Quanta Computer, a China-based company which is geographically closer to its other factories.
Individuals familiar with the matter revealed that the move was for Apple to save costs from shipping parts from the U.S. to China and vice versa for the last step of its production process.
“Final assembly is only one part of the manufacturing process,” Apple said in a statement. “Like all of our products, the new Mac Pro is designed and engineered in California and includes components from several countries including the United States,” Apple’s statement said.
The American tech giant supports manufacturing facilities in 30 states and spent $60 billion last year with more than 9,000 US suppliers with the continued promise to invest $100 million in the Austin plant, run by Quanta Computers and Flex.
But this move is probably Apple’s fulfillment of an earlier “promise” it made to President Donald Trump during the campaign.
In a speech during his campaign, Trump said that he would “get Apple to build their damn computers and things in this country instead of other countries.” Trump later said Apple CEO Tim Cook “promised” to build “three big plants, beautiful plants” in the US.
“I said you know, Tim, unless you start building your plants in this country, I won’t consider my administration an economic success,” Trump remarked in an interview.
Mac Pro production, which was previously held in Apple’s Texas factory, is relatively small in comparison to that of iPhone and iPad — as it is a product niche designed for professional users for production rendering and video editing. This is the first redesign the professional Mac gets after six years, which was created by the recently separated Jony Ive.
Or, is it moving production out of China?
However, Apple’s move to shift production from Texas to China is contrary to the reports that Apple is considering to pull out manufacturing from China and move it somewhere else in Southeast Asia and Mexico.
Apple has asked its major suppliers to evaluate the cost implications of shifting 15% to 30% of their production capacity from China to Southeast Asia as it prepares for a fundamental restructuring of its supply chain, the Nikkei Asian Review said in a new report.
Chinese production has played an enormous role in the global success of Apple over the past few decades. The country has not only been able to rally hundreds of thousands of skilled workers at short notice to fill rapidly rising orders as the company grew but an extensive and complex ecosystem of components, logistics and talent have built up in and around Apple manufacturing sites.
On the other hand, the presence of Apple in China has created millions of jobs for skilled Chinese workers. Some 5 million Chinese jobs rely on Apple’s presence in the country, including those of more than 1.8 million software and iOS App developers, according to a study available on the company’s website. Apple itself employs 10,000 staff in China, the company said.
This relationship between China and Apple makes it difficult to replicate in a short period of time, suppliers admit.
“It’s really a long-term effort and might see some results two or three years from now,” said one supplier. “It’s painful and difficult, but that’s something we have to deal with.”
Nonetheless, it seems that Apple is eager to move out its production from China over fears brought by the trade war. Furthermore, the report also suggest that even if the tension between U.S. and China come to an end as the trade war is resolved, Apple is less likely to backpedal from its plans to move out, highlighting other risks that come in doing business in the country.