With Wall Street analysts hoping for a Sino-U.S. trade war truce amid the G20 meeting in Osaka, the focus is on the future of
Apple Inc. sales and employment in China.
The “Greater China” market has been key to Apple’s sales growth with a 16 percent gain to $51.9 billion in the 2018 fiscal year ending on Sept. 29, “driven by higher net sales of iPhone, services and other products.”
But Blue Sea Research
warns that even if a truce in the Sino-U.S. trade war is negotiated by Chinese leader Xi Jinping and U.S. President Donald Trump at their June 29 meeting, Apple could see Greater China region revenues fall by $15-20 billion in 2019.
After 15 months of trade war rhetoric, Blue Sea suggests that Apple’s fabled Greater China “ecosystem” strategy that was supposed to provide interconnectedness for app developers and business partners has weakened. Once premier in consumer apps, China’s Tencent and Alibaba now dominate apps for payments, music, video, and others. As a result,
Apple’s iPhone market share in Greater China peaked at 15.5 percent in late 2015 and has plunged to 9 percent at the end of March.
Apple publishes a
‘Top 200' supplier list each year that accounts for about 98 percent of Apple’s annual procurement of materials, manufacturing and assembly. China and Hong Kong have tripled their number of Top 200 domestic suppliers to 41 since 2012. That topped the United States for the first time in 2018, after the number of American Top 200 Apple suppliers fell from 54 to 37 since 2012.
Apple directly employs only about 10,000 people in mainland China, mostly at its 42 company stores. But the total number of Apple supply chain production sites in mainland China increased by 26 last year to 380, accounting for almost 50 percent of all sites engaged in Apple’s supply chain work and more than 3 million jobs, according to South China Morning Post.
The Nikkei Asian Review reported on June 19 that Apple is planning to relocate between 15 to 30 percent of its production capacity out of mainland China, with locations in Vietnam, India, Mexico, Indonesia, and Malaysia under consideration.
Foxconn, Apple’s biggest supplier in China, recently told the Verge it has the contingent capacity to move all U.S. iPhone production out of China.
Although it is unclear how long the move would take, outsourcing 15 to 30 percent of Apple production could cost mainland China between 450,000 to 900,000 jobs.
A huge and unquantifiable risk for Apple is that the trade war has soured Chinese status-seeking consumers on buying premium priced American products, like iPhone, Mac Computer and Apple Watch.
