Low-end assembly contracts passé
The number of Chinese firms supplying Apple with components has more than doubled this year according to new research, as the nation’s manufacturers move up a gear from providing mere low-cost assembly labour to making more sophisticated parts.
It’s a trend that’s threatening Apple’s traditional high-end partners in other parts of Asia such as Japan, South Korean and Taiwan, and ultimately western partners, suggests research firm CLSA.
Its conclusions were drawn from studying Apple’s published lists of suppliers, aligned with its own analysis, and which found Apple’s Chinese component suppliers more than doubled from eight in 2011 to 16 this year as they moved into more advanced areas such as battery making.
Commented Nicolas Baratte, regional head of technology research for CLSA, “There are very, very serious companies emerging in China that are beginning to see the pay-off of many years of rapid growth in their spending on research.”
The transition also comes at a time as Apple continues to diversify its number of partners in a bid to drive down costs and avoid over dependency on any one firm. Strikes over pay and working conditions at Chinese plants run by Taiwain’s Foxconn have, for example, seriously dented Apple’s roll-out plans in the past. Since then Apple has awarded a large part of the order to build its new iPhone 5c to rival rival Taiwanese assembler Pegatron.
Meanwhile one Chinese company said to be moving up the value chain is GoerTek, which manufactures acoustic components in the eastern Shandong province. It had already been supplying Samsung when Apple approached it to make speakers for the iPad and new iPhone, as well as the new iPhone’s earphones.
GoerTek’s manufacturing capabilities, which include designing its own assembly line automation machines, are said to give it a faster turnround time on production than US competitors such as Knowles.
Other firms now thought to be a part of Apple’s supply chain are Desay and Sunwoda Electronics, both battery makers based in Shenzhen.