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

Apple caught between suppliers in Taiwan and assemblers in China; iPhone 14 delay possible
The Communist Chinese government got their panties in a bunch this past week when Speaker of the House Nancy Pelosi (D-Ca) visited Taiwan. China saw this as a violation of the "One China" policy that the U.S. has adhered to for fifty years. That policy states that the American government "acknowledges that all Chinese on either side of the Taiwan Strait maintain there is but one China and that Taiwan is a part of China" and the U.S. "does not challenge that position."

The People's Republic of China feels that the U.S. has violated its "One China" policy

While the U.S. has a formal relationship with the People's Republic of China (PRC), it does have an "unofficial" relationship with Taiwan that the PRC felt was being 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 Strait of Taiwan, and sending drones toward Japan while Pelosi was in Taiwan. The PRC also decided to cut off talks that it was having with the U.S. over various subjects.

Taiwan is where many major U.S. tech firms, like Apple, source supplies like chips. Taiwan Semiconductor Manufacturing Corp. (TSMC) is the top independent foundry in the world and counts Apple as its number one customer. Today, Apple told its Taiwan-based suppliers, including TSMC, that when shipping parts and components to China they must comply with China's new regulations that include labeling the supplies as made in "Taiwan, China" or "Chinese Taipai."

If the PRC's demands sound like a request that you would hear from a petulant child, you'd be absolutely correct. Asking Taiwan suppliers to do this is nothing more than the PRC acting like a bully to let everyone know who actually owns Taiwan.

The reason for the warning from Apple to its Taiwan-based suppliers is due to China's decision to hold up supplies sent by suppliers in Taiwan to the Pegatron factory in Suzhou China which builds some products for U.S. firms like Microsoft and Taiwan. These shipments are being held up by customs in the PRC and all documentation and shipping containers are being looked with a fine tooth comb to make sure that they don't mention Taiwan or its official "Republic of China" moniker.

Pegatron Vice Chairman Jason Chen and other executives from the Taiwan chip industry were photographed with Pelosi angering the PRC even more. Apple made it clear to its supply-chain today that this was an urgent matter, especially now, with the new iPhone 14 series being assembled. As it is, there are reports that the non-Pro iPhone 14 and iPhone 14 Max are having issues with their displays 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 needs 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 could result in these shipments being held up or getting rejected. Additionally, a fine of as much as ¥4,000 (US$592) can also be imposed.

But aye, here's the rub. On the other hand, Taiwan demands that all exports have a label stating the origin of the shipment which means that they need to be stamped "Taiwan" or "Republic of China." That of course is exactly what Chinese customs doesn't want to see. In an attempt to avoid supply chain disruptions, Apple has warned its Taiwan-based suppliers to develop some sort of contingency plans.

Apple also asked its supply chain to go through 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 huge headache for Apple right now and with the awkward timing, Apple has to remain diplomatic.

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