China’s Henan province sees drop in smartphone exports as Apple diversifies manufacturing supply chain outside the mainland
China’s central Henan province, home to the world’s largest iPhone manufacturing complex in its capital Zhengzhou, reported a 60 per cent year-on-year drop in smartphone exports in the first quarter, showing the impact of Apple’s moves to diversify production outside the mainland.
According to data released by Zhengzhou’s local customs authority, Henan’s smartphone exports totalled 6.65 million units in the first quarter, down 60.1 per cent from the same period last year. The customs data did not provide a breakdown of the handset exports by brand.
Henan last year exported 57.6 million smartphones, down 14.5 per cent from 2022, as production resumed across all handset assembly facilities in Zhengzhou after Covid-19 control measures were lifted.
Those figures reflect a broad push by Apple’s suppliers, including primary iPhone assembler Foxconn Technology Group, to expand their manufacturing supply chain in markets such as Vietnam and India, the world’s most populous nation. India has been the world’s second-largest smartphone market since the third quarter of 2017, according to data from research firm Canalys.
Foxconn, formally known as Hon Hai Precision Industry, stepped up its diversification efforts last year after it struggled to keep up with production targets in late 2022 after it was hit by an exodus of workers, who fled over fears of coronavirus transmission, followed by violent protests over employee allowances.
In the aftermath of that fiasco in Zhengzhou, a top Henan official went on a charm offensive in February last year to convince Foxconn chairman and chief executive Liu Young-way to keep the Taiwanese firm’s local operations and investment in the province. Foxconn is the single largest importer and exporter in the province, according to a report by local newspaper Henan Daily.
Lou Yangsheng, the Chinese Communist Party’s Secretary in Henan, assured Liu that the government would provide comprehensive services to its local operations, showing mainland China’s effort to preserve its major role in Apple’s manufacturing supply chain.
Foxconn last December won approval to invest at least US$1 billion more in a plant it is building in India that will make Apple products, which marks a major ramp-up in its goal to build a vast production hub beyond China.
The world’s biggest electronics contract manufacturer will spend that amount on top of the US$1.6 billion it earlier set aside for the 300-acre (121-hectare) site close to Bengaluru’s airport, according to a Bloomberg report that cited people familiar with the matter.
India’s iPhone exports have been growing significantly and are set to nearly double to US$12.1 billion in Apple’s current financial year, up from US$6.27 billion a year earlier, according to data from consultancy Trade Vision.
Indian salt-to-steel conglomerate Tata Group has just made it debut on Apple’s latest supplier list, following the company’s acquisition of Taiwanese firm Wistron Corp’s factory in southern India last year.
Tata has also been exploring a takeover of Taiwanese electronics contract manufacturer Pegatron’s iPhone assembly operations in India as soon as May, according to a Bloomberg report, citing sources.
Apple also plans to raise its investments in Vietnam. Apple chief executive Tim Cook last week pledged to “increase spending on suppliers” in the country, adding that such expenditure has reached nearly 400 trillion Vietnamese dong (US$16 billion) since 2019.
Apple suppliers including Foxconn, Luxshare Precision Industry and Goertek have operations in Vietnam.
Still, Apple sees mainland China as its prime manufacturing base. Apple added eight Chinese suppliers and removed four contractors in the country in its past financial year ended September, the first time since 2021 that the US tech giant introduced more mainland production partners than it cut.
“There’s no supply chain in the world that’s more critical to us than China,” Cook told state media China Daily in March.
