Apple Exposed for Accelerating Transfer of Supply Chain to China, Chinese Customs Create Obstacles

The United States’ Apple Inc. has been increasing the shift of its key supply chain to India and Vietnam. Meanwhile, Beijing is attempting to set up barriers to prevent this supply chain relocation. At the same time, mainland Chinese media have shown particular sensitivity to Apple’s supply chain news.

According to a report by the Nikkei Asian Review on Monday, Apple has been utilizing a 90-day tariff exemption period to intensify the shift of its key supply chain to India and Vietnam, expanding the production capacity of overseas factories. However, Beijing is trying to slow down this process by implementing stringent customs inspections.

An insider informed the Nikkei that Apple has been assisting suppliers in other countries to purchase equipment, which could help increase the production of iPhones in India by millions. The company has also informed suppliers that a majority of MacBooks and iPads for the U.S. market need to be produced in Vietnam.

Apple aims to produce at least 50 million iPhones in India this year, with most of them being sold in the United States.

The American tech giant had earlier requested its major suppliers to increase the production of iPhones in India. However, due to the factories there already operating at full capacity, expanding production has become challenging.

According to several sources, Apple has also instructed suppliers to ship components from China to Southeast Asia and India as much as possible to support the demand for various products in the U.S. market.

Simultaneously, sources revealed to the Nikkei that Apple has instructed its suppliers to accelerate the shift of production of components such as printed circuit boards to Thailand and other regions outside of China.

However, many components, such as connectors, mechanical parts, and metal casings, are highly cost-efficient to produce in China, making it almost impossible to shift mass production to other regions.

An executive of an Apple component supplier told the Nikkei, “We are being asked to air freight all components to Southeast Asia and India as much as possible… It’s like the customer is sweeping away all the inventory and shipping it out of China.”

He added that his company will have to bear additional airfreight costs.

Another manager of a major Apple supplier confirmed that “Apple is accelerating the diversification process of moving business away from China.” The manager also mentioned that Apple is now seriously considering multiple component production bases in Thailand.

On April 11th, the U.S. announced a list of products exempt from certain tariffs, including smartphones, laptops, and servers. This indicates that smartphones and laptops manufactured in China will be subject to a 20% basic tariff, while servers and electronic switches made in China will be subject to a 45% tariff.

A significant portion of products like Apple’s MacBooks and laptops from HP, Dell, Lenovo, Acer, and Asus are manufactured in China. Most iPhones are still produced within China.

U.S. Commerce Secretary Howard Lutnick mentioned on the 13th that these products, along with chips, may face individual tariffs in about a month.

Despite the U.S. government reducing tariffs to 10% for countries/regions other than China last week and suspending the imposition of retaliatory tariffs for 90 days, major tech suppliers like Foxconn, Pegatron, and Asus continue to operate their factories outside China at full capacity, showing no signs of cutting production.

It seems that mainland China is particularly sensitive to news regarding Apple’s supply chain relocation.

Hong Kong-based TF International Securities analyst Ming-Chi Kuo stated in an industry report that the production line in China dedicated to assembling U.S. model iPhones remains halted, indicating that the plan to shift production and export of U.S. model iPhones entirely to India starting from the second quarter remains unchanged.

Subsequently, mainland media altered Kuo’s remarks to claim that “Apple’s iPhone production line in China has stopped production as of April 9,” and invited relevant supply chain experts to refute this rumor.

On Monday, Kuo reiterated in a tweet that he did not refer to all iPhone assembly lines in China being halted, nor did he mention assembly lines for iPhones exported to “non-U.S.” markets being stopped, let alone iPhone component production lines.

He expressed puzzlement over the distorted reporting by mainland media.

However, Beijing seems reluctant to witness this situation and has intensified efforts to limit the transfer of industries and equipment. According to several sources, shipments of production equipment from China have been stalled due to the Chinese authorities’ heightened customs inspections over the past few months.

“We are not opposed to expanding production capacity, but challenges still exist… Exporting equipment from China remains a continuous struggle,” stated an executive of an Apple assembly plant.

Earlier reports by the Nikkei mentioned that Apple faced stricter customs inspections by Chinese authorities when exporting materials and production equipment overseas.

The report indicated that many top U.S. tech companies, including Meta, HP, and Dell, have instructed suppliers to accelerate production in Vietnam, requiring output from April to June to exceed previous expectations as they race against time to build inventory for the U.S. market before the 90-day exemption period expires.

Apple Inc. has not responded to requests for comments from the Nikkei.