Chances are most of us don’t really think about everything that does into our various Apple devices. But there’s a complex array of bleeding edge tech hiding inside those devices. And finding the parts, assembling them and shipping them to all parts of the world is a gargantuan exercise in logistics. So, when Apple decides to change things, it is a major undertaking.
Apple is in the process of making three major changes to the way it make its products. And while most of the focus is on the iPhone, which is arguably Apple’s most important product, the ramifications for the rest of Apple’s supply chain are significant.
Diversifying assembly from China to India
Chances are Apple has been considering the consolidation of most of its manufacturing to China as a risk for some time. Rising geopolitical tensions would always have been a consideration but the pandemic’s continuing impact will have hastened Apple’s plans to look for other manufacturing bases.
Apple has been making iPhones in India for several years. But typically, Indian-made phones have been older models while the latest iPhones are manufactured in China. Apple’s partner, Foxconn, established assembly plants in India and we are now seeing the iPhone 14 being made in India as well as China.
So, while the famous “Designed in California” tagline is still part of every Apple product the “Made in” label is seeing some change.
Chip manufacture is also spreading out
Apple’s investment in Intrinsity and parts of Dialog Semiconductor have paid off. The A-series and M-series System on a Chip (SOC) have given Apple unprecedented control over almost every element of performance across almost its entire product range. But, for the most part, those chips have been manufactured by TSMC (Taiwan Semiconductor Manufacturing Company) in Taiwan.
Apple has talked about making various computers outside of Asia for some time. In particular, it established a manufacturing plant in Texas for the Mac Pro. But is now taking about establishing chip manufacture in Nevada. And while there was speculation this would be for older processors, built on 5nm nodes, the founder of TSMC has said that TSMC will be making 3nm chips in the USA.
Again, I suspect there is some consideration of geopolitical issues here with China taking strong overtures of its desire to bring Taiwan closer to centralised rule from Beijing. But, again, having local fabrication not only shifts some risk away from having the manufacture of a key component centralised but it also puts the chip-maker closer to the Apple mothership in Cupertino.
That could lead to better cooperation between TSMC and Apple.
Samsung – Apple’s favourite ‘frenemy’
While Apple and Samsung compete strongly for supremacy over the smartphone market, they also collaborate. Samsung is a massive conglomerate with dozens of different business units. So, when Apple works with Samsung to update screens or other parts of the iPhone (and there devices) it’s not sleeping with the enemy. It’s more like like sleeping with enemy’s distant cousin.
Apple has shifted the purchase of NAND memory away from from Chinese supplier Yangtze Memory Technologies (YMTC) for iPhones targeting the China market, choosing Samsung as its preferred supplier.
For most of the world, this won’t have a major impact. But it does highlight the complexity of creating a device like the iPhone. There are dozens of relationships between component makers, assemblers and other suppliers that make the iPhone, and other Apple devices, what they are today.
Recent research put the cost of making an iPhone 13 Pro at USD$530. But this understates the value of the intellectual property that goes into the iPhone. And a significant part of that is the effort it takes to ensure there’s a reliable supply of components. Apple’s continued efforts to diversify its supply chain are good news.
It doesn’t only mean the risk of supply interruptions is reduced. Other countries reap the benefit as manufacturing jobs are created with the economic benefits that flow from that.
Anthony is the founder of Australian Apple News. He is a long-time Apple user and former editor of Australian Macworld. He has contributed to many technology magazines and newspapers as well as appearing regularly on radio and occasionally on TV.