By Yang Jie
Apple products say on the box "assembled in China," leaving the mystery of who did the assembling. Owners of a new iPad might be surprised to learn one of the answers: China's biggest electric-vehicle maker.
BYD, known globally as Tesla's most formidable EV competitor, has a second business manufacturing electronics, and it has grown to assemble more than 30% of Apple's tablets, according to industry executives and analysts.
The Chinese company said it had more than 10,000 engineers and around 100,000 employees dedicated to the "fruit chain," the local term for Apple's supply chain.
The combination of brand-name carmaker and contract electronics manufacturer makes sense to BYD executives, who say both businesses draw on the company's core competence of making precision devices at low cost.
Apple's rising dependence on two China-based contractors -- BYD and iPhone assembler Luxshare -- points to the difficulty of shedding Chinese manufacturing. The U.S. push to limit imports from the country is likely to expand in the second Trump administration.
Apple has been diversifying its supply chain to countries such as India and Vietnam and often turns to Chinese partners for expertise.
"We could not do what we do without them," Apple Chief Executive Tim Cook told Chinese state media on a visit to Beijing in late November, his third to China this year. In the first Trump administration, Cook successfully lobbied the president to exempt electronics including the iPhone from a tariff on Chinese-made goods.
An EV resembles a smartphone on wheels because both rely on batteries, chips and software. The blending of cars and phones is increasingly part of everyday business in China. BYD, which stands for "build your dreams, " supplies parts and contract manufacturing for both.
One client is Xiaomi, a top smartphone maker that ventured this year into sporty sedans. BYD helps assemble the Xiaomi phones and supplies some technology for its cars, Xiaomi founder Lei Jun said in April, describing BYD founder and chairman Wang Chuanfu as a friend.
Another BYD customer is Huawei, which makes both phones and EV software and sometimes displays phones and cars side-by-side in its showrooms.
Cook, on a visit to Shanghai in March, met BYD's Wang at Apple's office, where Wang and his staff showed Cook a miniature model of the iPad production system. Cook said on Chinese social media that BYD was among the Apple suppliers "pushing the boundaries of what's possible."
For Apple, which abandoned hopes of making its own EV, working with BYD helps it diversify its suppliers away from Foxconn, the Taiwanese assembler that makes the most iPhones and iPads. BYD isn't in line to assemble completed iPhones, according to industry executives and analysts, but it is taking a bigger role in iPhone parts such as the titanium frame.
BYD has said it also works with Apple's rival Samsung, supplying hinge-related components to some of Samsung's foldable phones.
BYD made news recently when its third-quarter revenue of about $28 billion exceeded Tesla's figure of $25 billion, the first time BYD had come out on top. The feat was possible because of BYD Electronic, the company's contract-manufacturing arm, which had revenue of about $6 billion in the quarter.
Wang, a chemist by training, started BYD three decades ago as a battery maker, and the company received an investment in 2008 from Warren Buffett's Berkshire Hathaway, which is also an Apple investor.
In its early days, BYD was often accused of imitation and landed in litigation with global leaders such as Sony and Foxconn. Legal battles between BYD and Foxconn, typically involving allegations of trade-secret theft and employee poaching, date back nearly two decades and continue to this day.
BYD's relationship with Apple began around 2009, when BYD started processing components, according to a company history published recently. It gradually won Apple's trust and was tapped to provide structural components such as metal, glass, ceramics and sapphire as well as assembly services, according to the book.
In its 2019 annual report, BYD Electronic highlighted a breakthrough in its business with a major North American client. The company said it had successfully entered the supply chain for the client's core products and started mass production, a passage that industry insiders said referred to Apple and BYD's production of iPads.
Today, BYD Electronic, listed separately on the Hong Kong stock exchange, has taken responsibility for some of Apple's sensitive work, such as titanium parts for the frame of Apple's latest iPhone Pro models, said Ivan Lam, an analyst with Counterpoint Research. The company likes to boast that its robot drillers can carve patterns on the surface of an eggshell without cracking it.
It has used acquisitions to expand, including the purchase of facilities in two Chinese cities last year from U.S.-based Apple supplier Jabil for about $2 billion.
One of BYD's responsibilities is helping Apple diversify its China-centric manufacturing, and it has helped Apple in countries such as Vietnam. BYD already makes smartphones in India for brands such as Xiaomi and could expand there if asked by Apple, said Counterpoint's Lam.
BYD said its next big thing would be developing AI-powered robots together with Nvidia for factories.
"It is like we are raising many fish in a pool, and honestly, we're not entirely sure which area of the market will mature in the future," said BYD battery executive Wang Haoyu at an event this year, citing the company founder's philosophy. "When a fish matures, we can scoop it out."
Write to Yang Jie at jie.yang@wsj.com
(END) Dow Jones Newswires
December 01, 2024 23:21 ET (04:21 GMT)
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