"Apple could not do what they do without China" - Truer words have never been spoken

BrianTycangco鄭彥渊

"Apple could not do what they do without China."

Truer words have never been spoken.

It also tells us that much of the high-end tooling and precision manufacturing required by $Apple(AAPL)$ 's premium products are not in danger of moving to India any time soon.

Image

Tim Cook is increasingly worried about AAPL's prospects in its 3rd largest market behind the Americas and Europe.

Imagine facing the possibility of losing 1/5th of your revenue stream - a market that could have been 2X larger than your current biggest market.

But it doesn't stop there. A bigger reason for Cook to worry is that 95% of Apple products are still made in China. India has no hope of replacing it anytime soon.

China is also coming up with very formidable alternatives to iPhone with Huawei $XIAOMI-W(01810)$ and OPPO. Soon, Chinese-made Harmony OS could dominate the domestic scene while slowly but surely gaining acceptance globally.

Loss of key market + loss of highly efficient manufacturing supply chain + loss of dominance in extremely profitable operating system = free cash flow destruction. Ouch.

It may not happen tomorrow, next month, or next year. But the writing is on the wall.

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