China is starting to lose its dominant position as a technology manufacturer. Booting from the iPhone

China has become on its own merits one of the great factories of consumer technology. He’s got muscle and he’s got workmanship. Now, however, the Asian giant is seeing how large multinationals in the sector are beginning to look for alternatives beyond its borders. The strengths that years ago made it an ideal setting are no longer so and “clouds” have been appearing on the horizon that play against it. It is not a theory. No vague long-term predictions. As soon as you look there are movements as they point in that direction.

And the iPhone 14 leaves a good example.

What’s going on?. That large multinationals in the sector are trying to diversify their production beyond China. Of course, keeping an eye on the interesting costs offered by the Asian labor market. New York Times sample Here’s a good “snapshot” to prove it: Apple produces iPads in northern Vietnam, Microsoft ships Xboxes from Ho Chi Minh, Vietnam, and Amazon has produced Fire TV devices in Chennai, eastern India. Years ago, all these products were assembled in another part of the continent: China.

The Apple Example. Perhaps the most paradigmatic example of what happens is left by Apple. TNYT ensures that the apple firm plans to assemble and package a small fraction of its new flagship device, the iPhone 14, in India for the first time. And not only that. Although most of the initial production is still in China, its intention would be to move part of the iPhone to India later, which among other things would allow it to evaluate its capacity in the country.

Experience in other parts of Asia has, of course. The company has already made AirPods in Vietnam, for example, and just a few days ago Financial Times pointed that those from Cupertino are negotiating to produce Apple Watchs and MacBooks for the first time in that same country. Of Apple’s top 200 suppliers, about twenty manufacture in Vietnam. The manufacturer Foxconn just signed also a millionaire agreement to expand and generate employment in the north of the nation.

and the Google. Apple is not the only one that seems to probe other latitudes in Asia beyond the popular republic. Google would also be planning —according to New York Times— moving manufacturing from Foxconn’s facilities in southern China to Vietnam and assembling the Pixel 7 phone there. His goal would be even more ambitious, with the Southeast Asian country providing up to half of the range Pixel phones next year’s discharge.

A matter of costs. How is the trend explained? Well, as almost always, due to a complex combination of factors; but among them there is one without which the scenario can hardly be understood: production costs. Specifically, those generated by labor. “The question of salaries is the deepest reason, the world moves for money”, recognizes Claudio Feijoo, professor and expert in technological diplomacy, in statements to elDiario.es.

As China has become more successful in the sector, it has also ceased to be the cheapest option. Over the past decade, Chinese manufacturing workers have seen their annual earnings triple. Expansion data show that in 2020 the minimum interprofessional salary in the Asian giant was around 281 euros per month, which represents an increase of 69% when compared to just under 166 just five years earlier.

And for sample, a button. As a reference, Foxconn is looking for workers in northwestern Vietnam for a monthly salary that, at least at the access level, is not even half of what the same company pays its new recruits at the Shenzhen factory, in China.

Labor costs are not the only ones that have been able to oscillate over the last few years in the country. “There are also all the associated costs. For example, China did not respect any environmental issues. Now it is not that it is the most respectful country, but it is beginning to have a series of laws and it is no longer worth doing anything”, details Feijoowho cites other factors, such as the greater control —and its economic repercussions— of corruption in the country.

Not everything is labor costs. Of course not. The loss of attractiveness in terms of labor costs is not the only handicap that plays against China. Politics and even COVID-19 have also had a lot to do with it. The stoppages registered in China at the beginning of the pandemic and its recent “Covid Zero” philosophy have affected large companies. In 2020, in fact, the closures that accompanied the first outbreak affected the planning of iPhones.

International politics in recent years has also been dotted with friction between the United States and China. There is the trade war that led the Donald Trump administration to raise tariffs to Chinese imports in 2019 and, more recently, the tension generated by the visit of the president of the US Congress, Nancy Pelosi, to Taiwan in August.

A relationship far from normal. With that backdrop, Joe Biden’s team just announced that US tech companies that receive federal funding will not be able to build “advanced technology” facilities in China for a full decade.

“They are not allowed to use that money to invest in China. They cannot develop cutting-edge technologies in China for a period of ten years.” stressed the Secretary of Commerce. The guidelines are part of a $50 billion plan to develop the semiconductor industry.

without losing perspective. That is the key. Although some multinationals seem to explore other latitudes in Asia, beyond China, the truth is that the Asian giant has established itself as one of the large factories of electronic products on an international scale. His weight is dominating. And altering the scenario is not easy. Not fast. Although China has seen its manufacturing activity contract, the truth is that it is not easy to compete with its muscle and its concentration of suppliers.

“We have a long way to go to diversify the entire supply chain outside of China,” says analyst Mehdi Hosseini a New York Times. The scenario would already be felt in other countries of the Asian continent. Increased interest in other locations, such as Vietnam, has also led to an increase in the price of its industrial real estate.