- COVID lockdowns and protests in China have reportedly pushed Apple to move production.
- It's the latest hit in a wave of talk about "reshoring" supply chains not always followed by action.
Apple wants out of China, people with knowledge of the issue told the Wall Street Journal. It's focused on production in Vietnam and India with a long-term goal of sourcing chips from Arizona.
And while the tech giant is a reliable trendsetter with supply chain bona fides, the data and the experts indicate other consumer goods makers are unlikely to follow its lead en masse, even as disruptive protests related to COVID lockdowns offer yet another reason to rethink their supply chains.
Various crises over just the last five years have brought on lots of talk about moving manufacturing closer to the end consumer, often called "nearshoring" or "reshoring."
Action, not so much.
"Interest in reshoring remains simply that: mostly interest," Lazard researchers wrote in a November report on the current "inflection point" for corporations.
We've been here before
The Trump Administration's tariffs from 2018, most of which are still in effect, triggered similar conversations about reducing reliance on China and it showed up in the numbers. China's share of US imports is shrinking slowly.
But the big jump in US manufacturing registered by consulting firm Kearney's Reshoring Index has since reversed, wiping out any progress and reaching its lowest point since the 2008 financial crisis in 2021.
In the macro view, any reshoring that happened in the last five years has since been counteracted by even more dependence on Asian manufacturing — with China taking the largest share.
In an August survey conducted by research firm Gartner, 95% of responding companies said they were reevaluating their China sourcing strategies. More than half had taken action. But the most common strategy to emerge from those considerations is a "China plus one" strategy — sourcing from China, with a backup source in another country.
The reason is, China has decades of manufacturing expertise and an ecosystem that makes it an easy, cost-effective place to make things because the raw materials, the machines, and the expertise are often all available in one place. (iPhone city is a literal city, after all.)
The most conservative analysts have estimated if Apple moves aggressively, it could get 20% of its supply chain out of China in eight years. The more bullish say it will take at least three years to move half.
The US awakens and China reopens
Even though China is hardly fading as the world's factory, US manufacturing projects are picking up in select industries.
"There's definitely a very strong push on the part of governments, not just the US government, but China, other parts of Asia, and the EU to localize production of semiconductors," said Goldman Sachs Managing Director Toshiya Hari in a November call with reporters. Electric vehicles, microchips, solar panels, batteries of all kinds — all of these are the target of multi-million dollar development projects across the US.
President Biden repeatedly presented a reliable, domestic supply of microchips as a vital security issue for the US in the lead up to signing the CHIPS Act in August, dedicated more than $50 billion to build up the industry.
Consistent supplies of sneakers or toys, however, are not national security concerns.
Sentiment around reshoring is almost entirely positive among US executives, according to Kearney. And most would say they had plans to move their supply chains away from China.
But just as the Wall Street Journal reported Apple's intent to leave China, the country's leaders relaxed the COVID restrictions that were strangling the economy. Transportation costs from China to the US are plummeting and doing business is about to get easier.
In a time where most companies are emphasizing cost-cutting, it's going to take a lot of conviction for this resurgence of reshoring sentiment to stick.