Executive Briefings

Should Apple, Others Consider Getting Out of China?

You'd expect to see headlines like this - 'Launch of New Apple iPhone Causes Riots - when consumers beat down doors and trample each other, yet these riots were in China, among workers at Foxconn, a major supplier to Apple and other U.S. companies.

Shortages were already occurring in Apple's supply chain, and the huge demand meant even higher production rates at some suppliers' factories. Some unconfirmed reports suggested that Foxconn's attempt to boost production by extending overtime and moving people from one location to another were significant factors contributing to the unrest and brief factory shutdown.

This issue has been percolating for quite some time, and it will require a reexamination by Apple - and plenty of other multinationals with Chinese production - of their overall supply-chain strategies. The fundamental flaw in U.S. companies' current approach to Chinese partners seems to be a lack of understanding of "cost arbitrage," the core of the strategy and the raison d'etre for being in China in the first place.

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Keywords: international trade, sourcing solutions, logistics management, IT supply chain, supply chain management, Foxconn riots, Apple China operations

Shortages were already occurring in Apple's supply chain, and the huge demand meant even higher production rates at some suppliers' factories. Some unconfirmed reports suggested that Foxconn's attempt to boost production by extending overtime and moving people from one location to another were significant factors contributing to the unrest and brief factory shutdown.

This issue has been percolating for quite some time, and it will require a reexamination by Apple - and plenty of other multinationals with Chinese production - of their overall supply-chain strategies. The fundamental flaw in U.S. companies' current approach to Chinese partners seems to be a lack of understanding of "cost arbitrage," the core of the strategy and the raison d'etre for being in China in the first place.

Read Full Article


Keywords: international trade, sourcing solutions, logistics management, IT supply chain, supply chain management, Foxconn riots, Apple China operations