Apple Likely Preparing to Boost U.S. Tech Investment, Shift Away from China: Munster

Apple investment in US technology will likely be increased as a response to the Ukraine crisis, reads a new report.

According to analyst Gene Munster of Loup, this investment boost in the US is in response to the Ukraine crisis demonstrating the fragility of over-dependence on Taiwan and China.

Munster argues that Apple’s dependence on China is the greatest threat to the company’s future, with the recent Russian invasion of Ukraine emphasizing that risk:

“The Russian invasion of Ukraine has put an end to the globalization we have experienced over the last three decades,” writes Munster.

The analyst emphasizes that there is a risk of China making a similar move on Taiwan, another country critical to Apple’s global operation:

For the past 40 years, the island has operated under a policy of strategic ambiguity where China allows Taiwan to operate as an independent country with free elections, capitalism and military control. The catch is that they cannot refer to themselves as an independent country.

This strategic ambiguity approach appears to be wearing thin in Beijing. In October 2021, Xi Jinping commented that “Taiwan independence separatism is the biggest obstacle to achieving the reunification of the motherland . . . and the historical task of the complete reunification of the motherland must be fulfilled, and will definitely be fulfilled.”

Consensus interpretation of Xi’s comments is that it’s only a function of time before China regains governess of Taiwan. If, and when, China makes its move, it will further stress relations with the US along with companies doing business in China. 

With Apple fabricating its A and M-series chips in Taiwan and the bulk of its supply chain in China, the Cupertino company is especially at risk, with most of its revenue growth coming from the latter country.

“In FY21, 18% of Apple’s revenue came from Greater China and I estimate 85% of the company’s products are assembled in China,” reads the report.

Back in 2018, Apple announced a five-year investment plan in US-based technology, and now the analyst expects the company to increase that investment:

In 2018, the company outlined a five-year goal to invest $350B in the US including next-generation silicon development and 5G innovation across nine US states. In April 2021, the company increased that investment target by 20% to total $430 billion.

That size of investment goes a long way. For example, Intel is expected to spend $20B on its Ohio chip factory. Using that data point as a measuring stick, Apple is allocating enough capital to build 20 fabs in the US. In the years to come, I expect more investment will be committed to the initiative.

Read the entire analysis over at Loup.