Apple Doubles Down on Other Asian Countries Amid China Troubles
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Apple is doubling down on other Asian countries as the company’s sales in China continue to be tepid. The structural US-China tensions are also prompting the iPhone maker to diversify its supply chain and reduce its reliance on China.
Apple CEO is on his tour of Southeast Asia and is currently in Singapore where is will reportedly meet the next prime minister, Lawrence Wong, and the current incumbent Lee Hsien Loong.
Tim Cook Is On a Visit to Southeast Asia
Cook’s Singapore visit comes shortly after AAPL announced that it would invest $250 million in the city-state. Apple said that “Singapore serves as a central operations center for Apple in the region, and is a hub for critical roles in software, hardware, services, and support.”
The company has three Apple Store locations in the country has supports 3,600 direct and 60,000 indirect jobs in the tiny country.
Apple has increased its focus on other countries in Asia as it tries to lower its over-reliance on China. On his weeklong trip to Southeast Asia, Cook visited Vietnam where he met Apple developers and users. He also visited Indonesia, where he met with outgoing President Joko Widodo. Cook talked about the possibility of Apple investing in manufacturing in Indonesia and said, “The investment ability in Indonesia is endless. There’s a lot of great places to invest, and we’re investing.”
Apple Is Increasing Its Footprint in Vietnam
Vietnam has emerged as an alternative for US companies looking to diversify their manufacturing from China. Apple along with its suppliers already produces iPhones, iPads, MacBooks, and Apple Watches, in Vietnam According to Reuters, Apple now has 25 suppliers in Vietnam as compared to 21 in 2020.
Apple Is Increasing Its Sourcing from India
India is another focus market for AAPL and last year it opened its first two retail stores there – a sign of the country’s growing importance. Apple has gradually increased sourcing from India and according to a Bloomberg report, 14% of its iPhones were assembled in the country in the last fiscal year, which was twice the previous year.
During Apple’s fiscal Q4 2023 earnings call last year, Cook said, “We had an all-time revenue record in India. We grew very strong double digits. It’s an incredibly exciting market for us and a major focus of ours. We have low share in a large market. And so it would seem that there’s a lot of headroom there.”
While he admitted that the average selling prices in India are lower than the company’s worldwide average and did not draw himself into comparing the market with India he stressed: “we see an extraordinary market (in India), a lot of people moving into the middle class, distribution is getting better, lots of positives.”
Huawei is Snatching Apple’s market share in China
One of the key reasons iPhone sales have sagged over the last year is that Apple is battling intense competition in China whose economy has anyways slowed down structurally. Huawei has especially emerged as a key competitor for Apple as the company has continued to thrive despite US sanctions.
It recently launched the Pura 70 series of smartphones that would compete directly with the iPhone 15.
AAPL Stock Has Underperformed
Meanwhile, Apple stock has been out of favor with investors and is the worst-performing FAANG stock this year. The company is no longer the world’s biggest company and lost out the title of Microsoft.
While Apple is betting on markets like India to offset the slowdown in China, the country might not be immediately able to fill the gap.
Budget handsets continue to dominate the Indian market with Samsung being the market leader. The bulk of the market is however with Chinese companies despite the ongoing troubles between the two neighbors who share a long and disputed border.
Low per capita income in India makes iPhones out of bounds for the majority of its 1.4 billion strong population. However, given the structural deterioration in US-China relations, Apple seems to have made a conscious decision to reduce its reliance on China.
That said, AAPL hasn’t yet given up on China and Cook has visited the country multiple times over the last year as the company tries to charm Chinese users some of whom seem to be drifting to domestic Chinese smartphone companies.
