Munster Says Apple Entering Transition Phase Of Reducing Reliance On China

Apple Inc (NASDAQ: AAPL) is entering a transition of reducing its reliance on China that may take as long as a decade to achieve, said Gene Munster, managing partner at Loup Ventures.

“If any company can pull off diversifying its supply chain without missing a beat, it’s Apple,” Munster wrote in a note on Loup's website.

He noted that Apple appears to recognize the inherent geopolitical risks of the supply chain and has been slowly shifting its production out of China.

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Revenues: According to his estimate, in 2021, between 52%-55% of Apple’s overall revenue was made in China — down from 60-62% in 2020.

“We expect that number will show a decline into the 45-50% range in 2022. Notably, of the 150 new manufacturing locations added in 2021, 79% are reportedly based outside of mainland China,” Munster said.

This includes expansion within the United States, Taiwan, Singapore, Vietnam, Malaysia and South Korea, he said.

“While these appear to be modest supply chain shifts, we view this as a quick pace given the sheer size of revenue that comes from China-based manufacturing: ~$160B in FY21,” Munster said.

Munster also pointed out that as a percentage of locations, China facilities account for 35% of the total in 2021, down from 39% in 2020. As a point of comparison, the number of U.S.-based locations increased to 11% from 9% during the same period, he added.

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