Breaking Boundaries: Apple, TSMC, and Mazda Spearhead the Exodus from China’s Supply Chains

Breaking Boundaries: Apple, TSMC, and Mazda Spearhead the Exodus from China’s Supply Chains

Introduction:

China has been the factory of the world for over four decades. However, companies are now reassessing their reliance on the country. Apple, chip-giant TSMC, and Mazda are diversifying their supply chains out of China³. According to a recent survey conducted by AmCham China and AmCham Shanghai in June, many foreign service companies (25%) and foreign manufacturers (20%) are contemplating scaling back their investment plans in China. The survey also revealed that approximately 25% of manufacturers actively explore relocating their global manufacturing operations out of the country⁹.

As a result, countries such as Vietnam, India, and Mexico are emerging as attractive destinations for companies seeking to diversify their supply chains. Mexico, in particular, has already begun attracting substantial investments, with notable companies like Mattel and Chinese battery manufacturer Contemporary Amperex Technology setting up new factories in the country. This shift highlights the potential benefits these countries stand to gain from the ongoing supply chain diversification efforts.

The global business landscape has significantly transformed recently, with many companies reevaluating their supply chain strategies. Among the key drivers behind this shift is the desire to reduce reliance on a single manufacturing hub and mitigate risks associated with geopolitical tensions, trade disputes, and disruptions like the COVID-19 pandemic. This article explores the notable examples of Apple, TSMC (Taiwan Semiconductor Manufacturing Company), and Mazda and their efforts to move their supply chains out of China.

• Apple’s Diversification Strategy:

Apple Inc., one of the world’s most valuable companies, has long relied on China for its vast manufacturing operations. However, Apple has been actively diversifying its supply chain in response to rising costs, trade uncertainties, and concerns over intellectual property protection. Apple has been shifting its supply chain out of China but still needs Chinese contractors to build the Vision Pro³. Apple was burned badly when protests against China’s COVID-zero lockdowns hit iPhone output in 2022. Since then, the company has been trying to diversify its supply chains away from China. Apple has already moved some of its iPhone production to India and was exploring moving its iPad manufacturing there, too³. The company has gradually expanded its production facilities across various countries to ensure resilience and flexibility in its operations.

India has become a significant manufacturing hub for Apple, promoting local production through its “Make in India” initiative. This move allows Apple to tap into India’s large consumer market while reducing its dependency on China. Apple has also shifted some production to countries like Vietnam and Taiwan, creating a more geographically dispersed supply chain network.

• TSMC’s Shift to Taiwan:

Taiwan Semiconductor Manufacturing Company (TSMC) plays a crucial role in the global semiconductor industry, serving as a key supplier for companies like Apple. Recognizing the geopolitical risks and growing tensions between China and the United States, TSMC has been working on diversifying its manufacturing locations. TSMC is also expanding elsewhere, including Taiwan and the US³. Two out of 18 TSMC plants are in China — most factories are still in Taiwan. As a matter of clarification, TSMC is not leaving the mainland altogether but expanding elsewhere, including Taiwan and the US³.

TSMC is expanding its presence in its home country, Taiwan, where it has invested heavily in new fabrication facilities. The company’s decision to reinforce its production capabilities in Taiwan aims to reduce potential disruptions to the semiconductor supply chain. This move enhances TSMC’s ability to meet growing demand and aligns with regional security concerns and the desire to maintain technological leadership.

• Mazda’s Regional Expansion:

Automaker Mazda has also been exploring options to lessen its dependence on China and optimize its supply chain. As China’s rising labor costs and geopolitical uncertainties pose challenges, Mazda has gradually diversified its manufacturing footprint to other countries. Mazda is asking its suppliers to produce more in Japan and less in China after experiencing considerable disruption to parts supply from Chinese companies impacted by Covid-19 lockdowns this year⁸. In August, Mazda said it would ask its parts suppliers to manufacture components outside China while boosting stockpiles in Japan³. The move was made after China’s COVID-19 lockdowns rocked the supply chain and production timelines, but prices are the real driving reason behind the move³.

One of the significant steps Mazda has taken is establishing production facilities in Thailand and Mexico. These strategic moves enable Mazda to tap into local markets and provide alternative manufacturing bases closer to key markets like North America. By diversifying its production locations, Mazda reduces the risk of supply disruptions and enhances its responsiveness to regional market demands.

• Honda Supply Chain is Embracing New Horizons

The renowned automobile manufacturer, Honda, has strategically shifted its manufacturing base away from China. Recognizing the evolving geopolitical landscape and the need to diversify its supply chain, Honda aims to reduce its reliance on China as the sole manufacturing hub. This move reflects the company’s commitment to mitigating risks and ensuring operational flexibility. By exploring alternative manufacturing locations, Honda is positioning itself to adapt to changing market dynamics and enhance its competitiveness in the global automotive industry⁹.

Honda is shifting its manufacturing base from China due to several factors. These include the need for diversification and risk mitigation, rising labor costs in China, accessing new markets, optimizing the supply chain, and considering geopolitical considerations. Honda aims to enhance competitiveness, reduce costs, and ensure a more resilient manufacturing network by making this strategic move.

Conclusion:

Companies are now reassessing their reliance on China and diversifying their supply chains out of China. Apple, TSMC, and Mazda are three companies shifting their supply chains to hedge against overreliance on China².

The shifting dynamics of the global business environment have necessitated reevaluating supply chain strategies, leading several prominent companies to explore alternatives to China as a manufacturing hub. Apple, TSMC, and Mazda are prime examples of industry leaders successfully diversifying their supply chains to mitigate risks and increase operational resilience.

Through geographical diversification, Apple has expanded its manufacturing operations in India, Vietnam, and Taiwan, reducing its reliance on China. TSMC, a vital player in the semiconductor industry, has focused on reinforcing its manufacturing capabilities in Taiwan to address geopolitical concerns. Mazda has strategically established production facilities in Thailand and Mexico, enabling it to optimize its supply chain while tapping into regional markets.

These companies’ endeavors to move their supply chains out of China reflect the broader industry trend of seeking geographic diversification to minimize risks and ensure business continuity. As geopolitical and economic landscapes evolve, companies must adapt their supply chain strategies to maintain a competitive edge in the global marketplace.

Source:

(1) Moving Supply Chains Out of China: How Apple, TSMC, Mazda Are Doing It. https://www.businessinsider.com/companies-leaving-china-diversifying-supply-chains-apple-tsmc-mazda-2023-6.

(2) Mazda pivots supply chain away from China – Just Auto. https://www.just-auto.com/news/mazda-pivots-supply-chain-away-from-china/.

(3) 3 major companies trying to move supply chains out of China and how they’re faring in their attempts to move away from the factory of the world. https://www.yahoo.com/news/3-major-companies-trying-move-010653796.html.

(4) Apple to move iPad production out of China for the first time: report. https://www.foxbusiness.com/technology/apple-move-ipad-production-china-first-time.

(5) Apple Makes Plans to Move Production Out of China – WSJ. https://www.wsj.com/articles/apple-china-factory-protests-foxconn-manufacturing-production-supply-chain-11670023099.

(6) TSMC’s US plant results from industrial policy to counter China, giving states like Arizona more economic heft. https://www.msn.com/en-xl/news/other/tsmc-s-us-plant-the-result-of-industrial-policy-meant-to-counter-china-giving-states-like-arizona-more-economic-heft/ar-AA1cF3wE.

(7) The critical minerals supply chain is the new front line of the US-China rivalry. https://www.scmp.com/comment/opinion/article/3223969/critical-minerals-supply-chain-new-front-line-us-china-rivalry.

(8) Semiconductors Maker TSMC Will Not Need to Be Destroyed in China’s…. https://www.bloomberg.com/news/articles/2022-10-12/no-need-to-blow-up-tsmc-in-china-war-taiwan-security-chief-says.

(9) Apple, Honda, and Mazda consider reducing China manufacturing after supply …. https://fortune.com/2022/08/25/apple-honda-mazda-china-manufacturing-supply-chain-relocation/.