Apple caught between suppliers in Taiwan and assemblers in China; iPhone 14 delay possible

The Communist Chinese government got their panties in a bunch last week when House Speaker Nancy Pelosi (D-Ca) visited Taiwan. China saw this as a violation of the “One China” policy that the United States has followed for fifty years. That policy states that the US government “recognizes that all Chinese on both sides of the Taiwan Strait maintain that there is only one China and that Taiwan is part of China,” and that the United States “does not challenge this position.”

The People’s Republic of China feels that the United States has violated its “One China” policy

While the United States has a formal relationship with the People’s Republic of China (PRC), it has an “unofficial” relationship with Taiwan, which China believed was made official with Pelosi’s visit. As a result, the country flexed some military muscle by flying 68 warplanes off the coast of Taiwan, sending warships toward the Taiwan Strait and sending drones toward Japan while Pelosi was in Taiwan. The People’s Republic of China also decided to suspend negotiations it had with the United States on various issues.

Taiwan is where many major US technology companies, such as Apple, source supplies such as chips. Taiwan Semiconductor Manufacturing Corp. (TSMC) is the largest independent foundry in the world and counts Apple as its number one customer. Today, Apple told its Taiwan-based suppliers, including TSMC, that when they ship parts and components to China, they must comply with China’s new rules, which include labeling the supplies as made in “Taiwan, China” or “Chinese Taipai.”

If China’s demands sound like a request you’d hear from a petulant child, you’d be absolutely right. Asking suppliers from Taiwan to do this is nothing more than China acting like a bully to tell everyone who actually owns Taiwan.

The reason for the warning from Apple to its Taiwan-based suppliers is due to China’s decision to withhold supplies sent by suppliers in Taiwan to the Pegatron factory in Suzhou China, which builds some products for US firms such as Microsoft and Taiwan. These shipments are detained by customs in China, and all documentation and shipping containers are scrutinized with a fine-tooth comb to ensure they do not mention Taiwan or its official “Republic of China” name.

Pegatron Vice Chairman Jason Chen and other executives from the Taiwanese chip industry were photographed with Pelosi, further angering China. Apple made it clear to its supply chain today that this was a matter of urgency, especially now that the new iPhone 14 series is being assembled. As it is, there are reports of the non-Pro iPhone 14 and iPhone 14 Max having issues with their screens and with camera lenses cracking.

With the unveiling of the 2022 iPhone models just weeks away, this is the last thing Apple needs

The last thing Apple’s need now is to have supplies earmarked for the iPhone 14 series assembly line rejected by customs and returned to Taiwan. Writing “Made in Taiwan” on any of China’s import declaration forms or on the actual shipping cartons may result in those shipments being detained or rejected. In addition, a fine of as much as ¥4,000 (US$592) may also be imposed.

But yeah, here’s the rub. On the other hand, Taiwan requires all exports to have a label indicating the origin of the shipment, which means they must be stamped “Taiwan” or “Republic of China.” Of course, this is exactly what Chinese customs do not want to see. In an effort to avoid supply chain disruptions, Apple has warned its Taiwan-based suppliers to develop some form of contingency plans.

Apple also asked its supply chain to review and edit labels on cartons and forms for shipments from Taiwan to China, if necessary, according to those familiar with the situation. Chip shortages and supply chain issues are a major headache for Apple right now, and with the awkward timing, Apple needs to remain diplomatic.

William

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