US is pushing hard to cut China out of the tech supply chain

By

AllOfUS says Apple helps censorship in China
Locking China out of the supply chain.
Photo: AllOfUs

It’s not just Apple that’s piling on the pressure when it comes to getting Taiwanese tech companies to move their manufacturing out of China.

According to a report published Thursday, the American Institute in Taiwan, the “de facto U.S. embassy,” is visiting companies and asking why they’re not moving more quickly in exporting their production capacity outside China.

Nikkei describes one visit by officials to a “key supplier to Apple”:

“It was immediately apparent that this was unlike previous courtesy visits, where U.S. officials stop in from time to time to hear what’s happening in the industry. This time, they cut the chitchat and threw out a blunt question soon after they sat down: ‘Why aren’t you moving more of your production capacity outside of China?’ they asked. ‘Why aren’t you moving faster?’

Participants described the conversation as ‘serious and unsettling.’ ‘We felt uneasy,’ said one. ‘They asked many questions that we didn’t know if we could answer. The answers would have involved unreported strategies about ourselves and our clients.’ But the message was unambiguous: The U.S. government was directly appealing to his company to cut its ties to China, he said.”

This goes way beyond Apple

It’s been well known for quite some time that Apple is pushing its manufacturers to explore locations outside China. Last year, Apple supposedly asked suppliers to explore other geographic locations due to the burgeoning China and U.S. trade war.

Since then, manufacturing in other places like India and Vietnam has only increased, while a recent report suggested that Apple could essentially bifurcate its production. That would mean having manufacturers producing products inside China for the Chinese audience. Meanwhile, a second production line could exist outside China focusing on the international market.

Today’s report quotes an executive level source familiar with Apple’s thinking in this area: “Apple has always been cultivating Chinese suppliers. The rationale behind this used to be that it gave Apple more price bargaining power against the existing suppliers, but now it has also become a strategy to diversify geopolitical risks.”

Overall, it seems that the pressure to diversify manufacturing goes way beyond Apple just wanting to avoid the price of iPhones being forced up. As Tzu-hsien, chairman of key Apple supplier Pegatron, reportedly told a Taipei forum: “It is a very confusing era. The tech industry in decades has never needed to pay such close attention to the international political dynamics as now.”