Apple Shifted To Chinese Suppliers To 'Cut Costs and Curry Favor With Beijing,' Report Finds

According to a new report from The Information, Apple has increased its reliance on Chinese partners, both as a way of cutting costs as well as to 'curry favor with Beijing.' 9to5Mac reports: Today's report from The Information comes on the heels of a separate report from the publication earlier this month in which it described a so-called secret deal between Apple CEO Tim Cook and Chinese government officials. Through this deal, Apple reportedly committed to investing more than $275 billion in China over five years.

The report details that Foxconn, which is headquartered in Taiwan, is on the verge of being unseated as Apple's top supplier by Luxshare, which is headquartered in China: 'Luxshare has the potential to unseat Foxconn as Apple's top supplier. The Chinese company already exceeds Foxconn's main publicly listed unit in terms of market capitalization, though Foxconn generated roughly $105 billion from Apple in 2020 -- more than 10 times Luxshare's haul. But in terms of valuation, Luxshare has also eclipsed major Apple contractors such as Quanta Computer, Pegatron and Wistron, all of which are headquartered in Taiwan. Foxconn has become increasingly concerned about Luxshare's meteoric rise, including its significantly higher net profit margin, going so far as to form a task force to study the company, Reuters previously reported.'

The report explains that Apple's move to shift more of its business to Chinese companies is part of Tim Cook fulfilling his $275 billion pledge to the Chinese government: 'In shifting more business to Chinese companies, Cook, the architect of Apple's supply chain in China, is fulfilling his pledge to Beijing to expand its domestic tech industry, which will help the country reduce its reliance on companies based outside the mainland, including Taiwan -- a country China considers a renegade region. A year after Cook signed the economic agreement with China, Luxshare became the first Chinese company to secure a final assembly contract for a major Apple product, the AirPods, ending the dominance of Taiwanese firms. Apple's moves also might win over more Chinese consumers, which at times have shunned Apple in favor of local brands like Huawei based on nationalism. Apple generates nearly 20% of its revenue from the country.' The report goes on to mention that Apple helped Luxshare manufature AirPods in 2017. 'The AirPods were Luxshare's first major assembly contract for Apple, catapulting the company into the upper echelons of Apple suppliers that handle, pack and ship finished goods,' reports The Information.

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