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How Apple’s Supply Chain Has Transformed Since 2019

Apple stock has gained recently on news that the Cupertino company has been looking to diversify its supply chain away from China. But the move has already been happening for years.

Recently, I wrote about how Apple is looking to diversify its supply chain away from China. The COVID-19 disruptions have lasted longer in the country, putting at risk what could have been a strong holiday of sales for the iPhone Pro lineup and pressuring Apple stock  (AAPL) - Get Free Report.

Today, I expand on this topic. Below, I use a few pie charts to illustrate how Apple’s supply chain has already morphed in a very short period of only three years.

Figure 1: How Apple’s Supply Chain Has Transformed Since 2019

Figure 1: How Apple’s Supply Chain Has Transformed Since 2019

Read also: Apple Stock: Supply Chain Will Be Key In Fiscal 2023

Apple: Still China-Dependent in 2019

The first chart below is taken from my June 2020 article about Apple’s supply chain, and uses data from the company’s fiscal 2019.

Back then, 48% of Apple’s top suppliers that, combined, accounted for about 98% of Apple’s procurement spending, were located in mainland China. Worth noting, this is merely a count of manufacturing or assembly facilities, not a ratio of units produced or money spent.

Figure 2:undefinedLocation of supplier facilities by main region, top 200 suppliers.

Figure 2:undefinedLocation of supplier facilities by main region, top 200 suppliers.

The “other Asia” bucket, which excludes China, Japan and Taiwan, added up to 17% and was largely represented by South Korea plus southeast Asian countries like Vietnam.

Also worth noting, suppliers located in Japan accounted for 16% of the total and those in the US, for only 7%. Keep these numbers in mind for the comparisons below.

The US-China Trade War

During the Trump administration, the trade policy tit-for-tat between the US and China escalated, fueled by the US President’s protectionist economic platform. At the same time, political pressures by the Chinese government on Apple made it more challenging for the Cupertino company to conduct business in the country.

By fiscal 2020, only 39% of Apple’s suppliers were in China vs. 48% in fiscal 2019. The net loss was fully absorbed by “other Asia”, now accounting for 28% of the total vs. 17% before. Japan lost some relevance, representing only 10% of the grand total.

Figure 3: Location of supplier facilities by main region, 98% of total spend.

Figure 3: Location of supplier facilities by main region, 98% of total spend.

Apple Spreads The Love

Apple’s fiscal 2021 was heavily impacted by the COVID-19 crisis. Because the epicenter of the pandemic was China, and business in the Asian country still suffers the consequences of the zero-tolerance policy, Apple has moved more aggressively to diversify its supply chain.

The chart below shows that, currently, only 30% of suppliers are located in mainland China – although, as we know, the concentration of iPhone assemblers in Zhengzhou has been a thorn in Tim Cook’s side this year.

Figure 4: Location of supplier facilities by main region, 98% of total spend.

Figure 4: Location of supplier facilities by main region, 98% of total spend.

Notice that Asia ex-China, Japan and Taiwan already account for 34% of the total. This figure is twice as large compared to fiscal 2019. In South Korea alone, there are 30 suppliers including 3M, Broadcom and Corning, a YOY increase of 30%.

Another slice of the pie also stands out: 10% of Apple’s suppliers are in the United States, substantially more than 7% last year. Forget California: the supplier locations are well spread across the East and West coasts, plus Texas, the Midwest and others.

In fact, the US is Apple’s second-largest supplier hub in the world today, narrowly edging Taiwan. Bringing production and assembly home, where cross-country political issues are much less of a factor (if one at all), may continue to be a trend going forward.

Ask Twitter

Pop quiz: Apple is still highly dependent on China for production, as roughly one-third of its suppliers are located in the country. By number of suppliers, which is Apple’s second-largest hub in the world today? Check out Thestreet.com/Apple to find out.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Apple Maven)