The potential benefits of supply chain diversification for Apple’s Chinese suppliers. The analysis, released on October 18, explores the trend of supply chain relocation and the rise of trading blocs amid escalating U.S.-China tensions and the ongoing COVID-19 pandemic.
The trend of supply chain diversification has gained momentum, driven by factors such as China’s dominance in the global supply chain, overcapacity concerns, and U.S. policy. “Tariff war 2.0 would also likely accelerate the pace of global supply chain relocation.” This shift is expected to benefit companies in India, ASEAN, and Mexico.
Apple plans to increase iPhone production in India, while some of its Chinese suppliers have invested in factories overseas. The company’s latest supplier list reveals that it is buying from GoerTek and Luxshare in Vietnam, as well as China. Wingtech Technology, another key supplier, has factories in Malaysia and the Philippines.
Luxshare Precision Industry, and GoerTek as potential beneficiaries of supply chain diversification. These companies already manufacture in various parts of the world outside of China. Bernstein analysts also highlight Luxshare as a top pick, with a price target of 50 yuan ($7.02), 15% above its recent closing price.
Bernstein analysts express caution about India’s potential to become a viable alternative to China for iPhone production, anticipating that Luxshare will gain share in smartphone assembly in China. Chinese companies’ overseas revenue has grown over the last few years, and a portfolio of companies with high overseas sales exposure has generated 9.5% annualized alpha from 2019 to 2023.
