Designing advanced components for Apple products instead of just supplying low-cost labour is increasing among many Chinese companies.
The shift in being able to design these advanced components is an indication that technological capabilities are on the rise among Chinese companies.
According to Apple’s published list of suppliers and research from the brokerage CLSA, the number of Chinese companies supplying Apple with components has doubled from just eight in 2011 to 16 this year.
Over the last year we can see how Apple is trying to diversify its suppliers in order to reduce dependencies on one company and lower manufacturing costs.
The most recent account of this is Apple shifted away from just using Taiwan’s Foxconn for iPhone 5C manufacturing. They also gave a substantial order to Pegatron, another Taiwan based company.
GoerTek is a Chinese company that is moving up in the value chain. They are an acoustic company based in eastern Shandong province. GoerTek is capable of designing its own machines for automating the assembly line, which gives a faster turnaround than other competitors.
Desay Battery and Sunwoda Electronics are both Shenzhen-based battery companies which are believed to have joined Apple’s supply chain. These companies have not been listed on Apple’s list of supply chains this year but according to market watchers, they are believed to be supplying the battery systems to the iPhone 5.
According to the Financial Times:
That addition is cutting into the market share and pricing power of Taiwanese groups Simplo and Dynapack, said Dennis Chan, an analyst with Yuanta Securities in Taipei. In part, he said, that new competition is because some once cutting-edge electronic components are now becoming less technically challenging to make.
In particular, the move from laptops to smartphones means “battery structures are simplified, so that lowers the entry barriers drastically, allowing the Chinese players to get in”, said Mr Chan.
With Apple growing its manufacturing partners there will be less manufacturing delays allowing consumers to get a hold of the products they want quicker.
