But according to InsingerGilissen analyst Jos Versteeg, Goyal thought it a little too positive. “Apple has been trying to reduce its dependence on China for years, but it’s struggling to do it,” he says. “They have a factory in India, but it’s mainly focused on assembly. The big problem is that the parts are not only assembled, but also have to be manufactured. And China is absolutely at the forefront of this”.
Versteeg says there are more than 400,000 companies in China that meet the ISO 9001 quality mark. ‘There are only 36,000 in India and only 25,000 in the US. In short: China has been specializing in the production of technical components for many years,’ he continues. “They also have good staff and a very cooperative government. Tax breaks, employee apartment complexes, highways, you name it. China has seduced Apple in such a way that it is not India’s turn at the moment.’
Capacity problem
He points out that production may have increased after Apple’s profit warning. “That profit caveat was pretty unique,” she continues. “They said they expect a shortage of iPhones because the Zhengzhou factory has had problems with covid, so they want to become less dependent on China.”
But it will be very difficult, thinks Versteeg. ‘It has been said that they want a 25% production rate outside of China. I don’t know if Apple says this, but it’s circulating. This is expected to happen in 2025, but I highly doubt it will happen. India would like to, but it doesn’t have the quality to do it».
Geopolitics
However, moving some production to India is an alternative to reduce dependence on China, Versteeg believes. “Of course we are looking at it, but as India is still far behind, it won’t happen overnight,” he says. ‘A lot of water still has to flow through the dunes there before it can really take hold. But the difficult relationship between China and the United States is worrying.’
Note, however, that there may be light at the end of the tunnel in the future. “Recently it can be seen that mutual relations are improving a bit,” she concludes. ‘May China also understand that little progress will be made this way. It can be seen that China is seeking greater rapprochement in this regard.’