Beijing: Chinese businesses and investors are reconsidering the benefits of being overly dependent on the US tech giant for business as Apple re-evaluates supply chain risks in China and ramps up production in countries such as India and Vietnam, according to corporate filings and analysts. brings diversity.

This month's news that Goertec, a maker of AirPods based in northeastern Shandong province, had lost an order from "a major overseas customer" is a case in point. Investors quickly sold off the stock after realizing it could only be one company, wiping off billions of dollars in market value.

Apple, once one of the company's largest suppliers of camera modules, saw revenue fall 53% year over year in 2021 and 37% in the first three quarters of this year after being removed from Apple's supplier list in 2021.

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However, Steve Peters, a Hong Kong-based management consultant at EmperorFBA.com, said that despite these concentration risks, Chinese contractors often have no choice but to compete for business from the maker of the iconic iPhone and iPad.

Peters said, "There are only a few major players in the electronics industry. Everyone is jockeying for position [with Apple] and it's really an inner circle."

Even though nearly half of Apple's top 190 disclosed suppliers were located in mainland China by September 2021, the risks are clear to contractors, who rely heavily on Apple, and China's stock exchange is taking notice.

Shenzhen Tongtaiing Technology Co., Ltd., a supplier of insulators for cell phones and computers, is currently awaiting authorization to be listed in Shenzhen.

Its reliance on Apple as the primary consumer of its products, which will account for 88% of its revenue in 2021, up from 848% in 2020, is cited in the prospectus as a significant risk.

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It mentions Apple by name more than 900 times in the 272-page statement that responded to inquiries from the Shenzhen Stock Exchange.

Foxconn, a supplier of electronic parts to Apple through companies such as Dongguan Sixpure Intelligent Technology Co., claims in its prospectus that 77% of its total revenue comes from Apple.

This led the Shenzhen Stock Exchange to wonder whether the orders were "sustainable" and if its reliance on Apple posed a significant risk.
The exchange has also asked the trade to evaluate the risk of possible relocation of Apple's supply chain and escalation of trade tensions between the US and China.

Apple will be immediately affected by any changes in US government policy and limitations on technology made in China, which will have an impact on its suppliers.

In response, Huaxi Securities, the underwriter of Dongguan Sixpure's anticipated IPO, said that due to "differences in industries, infrastructure and qualifications of workers", neither India nor Vietnam can capture China's position in the Apple supply chain.

Furthermore, he claimed that China still holds an edge over the US, Japan, and South Korea in terms of labor costs, speed of logistics, and support for its political system.
Dongguan Sixpure's ability to obtain exchange approval for listing is currently uncertain.

The response is already "no" for Apple supplier Shenzhen Synvo Automation, which filed for an IPO in 2021. Its application to list on Chinaxt, a subsidiary of the Shenzhen Stock Exchange with a Nasdaq-like structure, was rejected in March. Revised listing guidelines, partly due to its highly dependent relationship with the Cupertino, California-based tech giant.

On Chinese social media, the drop in Goertec's stock has sparked a new discussion on whether being an Apple supplier is a blessing or a curse. Are those outside still interested in getting in or are those inside hoping to escape?

Apple is famous for high standards and has a history of punishing vendors who don't meet them. For example, at the end of each quarter, the tech giant regularly revises product and service prices based on demand and competition levels. As a result, suppliers often have to lower their prices to win Apple's favor.

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In the ten years between 2008 and 2018, the combined revenue of Apple's nine major Chinese suppliers rose from 625 million yuan (US$87.8 million) to 19.6 billion yuan, according to a research note by TF Securities. However, over the same ten years, gross margin declined from 10% to 20%, and analysts blamed the decline on increased competition.