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Inside Apple’s and Samsung’s Supply Chain Shift Away From China | WSJ

China has long been the manufacturing hub for tech giants like Apple and Samsung. But now, a range of geopolitical factors are prompting a shift in their supply chain strategies. In 2008, Samsung made the first move by setting up a plant in the Bac Ninh region of Vietnam to reduce its reliance on China. This forward-thinking decision allowed Samsung to benefit from cheaper labor, insulation from geopolitical tensions, and resilience against supply chain disruptions like those experienced during the COVID-19 lockdowns in China.

Samsung’s Shift Away from China

In 2008, Samsung established a plant in Vietnam to reduce dependence on China
Benefits include cheaper labor, insulation from geopolitical tensions, and supply chain resilience
Rising labor and operating costs in China, coupled with intense domestic competition, led Samsung to shift its smartphone operations out of the country
Significant reduction in Samsung employees in China since 2013, with a focus on moving smartphone operations to Southeast Asia

Apple’s Transition Away from China

Following Samsung’s lead, Apple also started diversifying its operations away from China
Tariffs on Chinese goods and geopolitical tensions pushed Apple to reconsider its manufacturing locations
Violent protests at Apple’s largest iPhone manufacturing plant in Guangzhou during the pandemic further accelerated its move away from China
Plans to manufacture a portion of its iPhone 14 models in India indicate Apple’s commitment to diversifying its supply chain

New Manufacturing Hubs: India and Vietnam

Both Samsung and Apple are focusing on manufacturing in India and Vietnam to diversify their supply chains
Tax breaks, grants, and incentives have attracted companies to set up manufacturing operations in these countries
Samsung and Apple have increased their presence in Vietnam, taking advantage of lower tax rates
Samsung has opened the world’s largest mobile phone factory near New Delhi, becoming a dominant force in India’s smartphone market

Challenges and Resilience

Despite moving away from China, both companies may still rely on Chinese suppliers for certain components
Political challenges and delicate supply chain diversification are key considerations for Samsung and Apple
Apple’s collaboration with US Chipmaker Broadcom aims to source critical chip components from US manufacturing hubs, reducing dependence on China
While the supply chain shift won’t happen overnight, Samsung and Apple’s strategies reflect a larger trend toward de-risking in global markets

Hot Take

As Samsung and Apple navigate the complexities of global supply chains, their shift away from China highlights the importance of diversification and resilience in today’s volatile geopolitical landscape. By expanding operations in countries like India and Vietnam, both companies are positioning themselves for long-term success and mitigating risks associated with concentrating manufacturing in a single location. This strategic approach not only enhances supply chain flexibility but also reinforces their competitiveness in the ever-evolving tech industry.