In recent weeks, Apple Inc. has accelerated plans to shift some of its production outside China, long the dominant country in the supply chain that built the world’s most valuable company, say people involved in the discussions. It is telling suppliers to plan more actively for assembling Apple products elsewhere in Asia, particularly India and Vietnam, they say, and looking to reduce dependence on Taiwanese assemblers led by Foxconn Technology Group.
Turmoil at a place called iPhone City helped propel Apple’s shift. At the giant city-within-a-city in Zhengzhou, China, as many as 300,000 workers work at a factory run by Foxconn to make iPhones and other Apple products. At one point, it alone made about 85% of the Pro lineup of iPhones, according to market-research firm Counterpoint Research.
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One response, say the people involved in Apple’s supply chain, is to draw from a bigger pool of assemblers—even if those companies are themselves based in China. Two Chinese companies that are in line to get more Apple business, they say, are Luxshare Precision Industry Co. and Wingtech Technology Co.
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Apple’s longer-term goal is to ship 40% to 45% of iPhones from India, compared with a single-digit percentage currently, according to Ming-chi Kuo, an analyst at TF International Securities who follows the supply chain. Suppliers say Vietnam is expected to shoulder more of the manufacturing for other Apple products such as AirPods, smartwatches and laptops.
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Dan Panzica, a former Foxconn executive who now advises companies on supply-chain issues, said Vietnam’s manufacturing was growing quickly but was short of workers. The country has just under 100 million people, less than a 10th of China’s population. It can handle 60,000-person manufacturing sites but not places such as Zhengzhou that reach into the hundreds of thousands, he said.
“They’re not doing high-end phones in India and Vietnam,” said Mr. Panzica. “No other places can do them.”
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Nonetheless, “Apple is going to have to find multiple places to replace iPhone City,” Mr. Panzica said. “They’re going to have to spread it around and make more villages instead of big cities.”
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