3 major companies trying to move supply chains out of China, and how they're faring in their attempts to move away from the factory of the world (2024)

• China has been the factory of the world for over four decades.
• But now, companies are now reassessing their reliance on the country.
• Apple, chip-giant TSMC, and Mazda are diversifying their supply chains out of China.

China has been the world's factory for over 40 years — but the tides are changing.

China's era of globalization and integrated supply chainsstarted to crumble around 2018, after then-President Donald Trump launched a trade war against the East Asian giant. Nearly three years of strict on-off COVID-19 lockdowns also prompted investors to reassess their geopolitical risks.

"The geopolitical tensions, in themselves, may not have resulted in this level of realignment of supply chains, but COVID certainly provided that extra vision, extra fillip, the extra fuel to the fire," Ashutosh Sharma, a research director at the market-research firm Forrester, toldInsider in December.

Even some Chinese manufacturers are shifting parts of their supply chains out of China to manage risks.

Ted Cannis, a senior executive at Ford, told the Financial Times in December that there is a "large-scale rethinking of logistics operations" across the auto supply chain. "The supply chain is going to be the focus of this decade," Cannis said.

We took a look at three major companies that are dialing back their reliance on China's manufacturing, and how they're faring in their attempts to move away from the factory of the world.

1. Apple has been shifting its supply chain out China — but it still needs Chinese contractors to build the Vision Pro

Apple was burned badly when protests against China's COVID-zero lockdowns hit iPhone output in 2022.

Since then, the companyhas been trying to diversify its supply chains away from China. Apple has alreadymoved some of itsiPhone production to India, and it was exploring moving its iPad manufacturing there, too.

But there's no getting away from the manufacturing powerhouse.

Apple's reliance on Chinese suppliers is evident from a recent analysis of the latest bill of materials — a list of raw materials and parts — for the Vision Pro mixed reality headsetunveiled last week, according toWellsenn XR,a China-based consultancy.

According to Wellsenn, the list shows eight Chinese companies involved in the making of Apple's Vision Pro headset. They includecamera module maker Cowell e HoldingsandLuxshare, a company assembling the product for Apple.

Among the companies Apple is relying on to make the Vision Pro is Taiwan's Foxconn — which is the main supplier shifting its supply chain away from China.

Foxconn Chairman Liu Young-way said in a March earnings call that the company needs to expand operations in not just China but also countries such as the US, Vietnam, India, and Mexico.

2. TSMC has made a $40 billion commitment to US manufacturing — even though it doesn't make sense financially

TSMC, the world's largest contract chipmaker,is caught in the thick of geopolitical tensions.

TSMC started manufacturing in China in 2004. Two out of 18 TSMC plants are located in China — the vast majority of the factories are still in Taiwan.

To be clear, there's no indication TSMC is leaving the mainland altogether — but it is expanding elsewhere, including Taiwan and the US. In December, TSMC announced it would be opening a second factory in Arizona, increasing the company's investment in the state from $12 billion to $40 billion. The factories will be partially subsidized by the US government through the CHIPS and Science Act, which provides a $52 billion to boost US semiconductor chip production.

TSMC's founder Morris Chang has argued the investment isn't prudent for either TSMC or the US.

Chips made in TSMC's US factory are likely to be 15% to 20% more expensive than those made in Taiwan and China, Dylan Patel, a chief analyst at the semiconductor research and consulting firm SemiAnalysis, told Insider in December.

Apple is TSMC's largest customer. The tech giant accounted for 26% of its revenues last year. Apple CEO Tim Cook has said the company will be the factories' largest customeronce they go online.

3. Mazda is shifting production of some parts back to Japan

Japanese carmaker Mazda used to champion theproduction of car partsin China — but it has pivoted from that position.

In August, Mazda said it would ask its parts suppliers to manufacture components outside China while boosting stockpiles in Japan, Reuters reported, citing company executives.

The move was made after China's COVID-19 lockdowns rocked supply chain and production timelines, but prices are the real driving reason behind the move.

"It is no longer an era where cost is the major driving factor," Masahiro Moro, a senior managing executive officer at Mazda, told Financial Times in December. "Right now, robustness of our supply chain also needs to be considered to ensure the stable procurement of parts."

"As we continue to do business globally, we must manage the current changes based on the recognition that we are no longer in the era of globalisation as we were in the past," said Moro, per Reuters.