According to author and journalist Patrick McGee, the decades-long reliance on China has not only exposed Apple Inc. (NASDAQ:AAPL) to growing geopolitical uncertainties but has also helped elevate its rivals.
What Happened: While discussing his new book, Apple In China, on CNBC’s “Squawk Box” on Monday, McGee says the tech giant inadvertently became the largest supporter of Beijing’s “Made in China 2025” initiative, a policy launched by Chinese Premier Xi Jinping in 2015, aimed at achieving self-sufficiency in advanced manufacturing.
McGee says Apple only came to recognize its role in advancing Beijing’s industrial ambitions midway through the last decade.
Around 2015 and 2016, they realized “we are actually the biggest supporter of this,” he says, “Our investment is more than double the Marshall Plan, adjusted for inflation, each year in China,” referring to the multi-billion-dollar U.S. economic aid to Western Europe after World War 2.
According to McGee, Apple has invested roughly $55 billion annually into Chinese factories owned by third parties. The company supplied wages for workers, training, and equipment.
This was eventually repurposed by local smartphone giants, Oppo, Vivo, Huawei, and Xiaomi, he says, with Apple’s own supplier development efforts helping push Chinese smartphone makers to over 50% of the global market share. “The reason their technology is so good is Apple trained all of their suppliers,” McGee says.
McGee argues that Apple missed key opportunities in the early 2010s to diversify its supply chain, opting instead for aggressive stock buybacks. “If they were instead spending $50 billion a year building resiliency in the supply chain, they’d be in a better position,” he says.
Now, as Apple shifts manufacturing to India, McGee warned the move comes “a decade too late.” While he supports the strategy, he cautioned that India could follow a similar path. “What if [Narendra] Modi takes India in a very authoritarian direction? That’s a risk, for sure,” he says.
Why It Matters: Apple has been at the center of the trade and tariff storm in recent months, with Rosenblatt analyst Barton Crockett saying that “Trump tariffs could blow up Apple,” citing the company’s heavy exposure to China.
According to tech analyst Dan Ives of Wedbush Securities, Apple could ramp up iPhone assembly production in India by 60 to 65% by fall, which he refers to as its “best case scenario,” while adding that producing in the U.S. is just “not feasible.”
Apple CEO Tim Cook recently confirmed during the company’s first quarter earnings call that “the majority of iPhones sold in the U.S. will have India as their country of origin.”
This, too, however, has taken an uncertain turn, with President Donald Trump telling Cook that he doesn’t want him building in India.
Price Action: Apple shares were down 1.17% on Monday, trading at $208.78, and are up 0.06% after hours. The stock is down 14.38% year-to-date.
According to Benzinga’s Edge Stock Rankings, Apple is ranked in the 76th percentile on quality, but fares poorly on Momentum, Growth, and Value. It also has an unfavorable price trend in the short, medium, and long term. You can check here for deeper insights and metrics on the stock.
Photo Courtesy: Prathmesh T on Shutterstock.com
Read More:
