The annual "Apple fever" is in full swing, and the iPhone 15 is set to make its debut.

Over the years, Apple has remained a constant, while its suppliers have come and gone.

Some say Apple is like a besieged city. Those inside want to escape, while those outside are eager to break in.

Simply put, the "tragedy" of the Apple supply chain and the "fortress" of profit margins are driving foreign companies to shut down their operations in China or relocate to Southeast Asia.

While the situation appears significant, the transition is actually difficult to navigate. Some have even concluded that China has lost its appeal for foreign investment.

In reality, China’s attraction of foreign investment is a “double-edged sword.” The natural ebb and flow of capital is a normal market phenomenon, consistent with the laws of development, and a reflection of investment liberalization and facilitation.

What ultimately determines success in manufacturing? It is cost leadership—achieved through guaranteed quality and efficient delivery!

01 Apple Supply Chain Companies: Pros and Cons

The story begins with supply: the fates of hundreds of domestic and foreign companies are tied to Apple’s.

An “Apple Supplier Responsibility Agreement” serves as a “guide to entering the supply chain.” The keys to gaining entry into the “Apple supply chain” are, first, cutting-edge technology, and second, scale and production volume.

As is well known, Apple updates its supplier list annually. On one hand, this is to reduce costs through natural selection among suppliers; on the other, it strengthens Apple’s influence and control within the supply chain.

Although it serves as a testament to the strength of consumer electronics manufacturers, being part of the “Apple supply chain” is also a double-edged sword. It is not uncommon to see companies soar to the heights one day and plummet to the depths the next.

Under the halo of the "Apple supply chain," manufacturers do indeed reap the benefits of revenue growth. Especially as Apple prepares to launch new products, companies across the supply chain are working feverishly to ramp up production. For example, contract manufacturer Foxconn is currently offering high wages to recruit workers in multiple locations, including Zhengzhou, Shenzhen, and Chengdu.

Behind the scenes, different contract manufacturers compete on price, with the lowest-cost bidder securing the orders. Amid this price war, to preserve their meager profits, many companies are relocating production bases to India and Vietnam to cut costs, driving suppliers’ gross profit margins ever lower.

Throughout the supply chain, it is not small and medium-sized enterprises that are bearing the brunt of the pressure. As Samsung’s largest client, Apple has been sourcing OLED panels, memory chips, and other products from Samsung. For years, Apple has repeatedly demanded price cuts, and given its heavy reliance on Apple, Samsung—a leader in the memory chip sector—has had no choice but to comply.

Faced with this predicament, not putting all their eggs in the “Apple” basket may be the key for companies in the Apple supply chain to break out of this deadlock.

Consequently, companies in the Apple supply chain have embarked on a path of diversification to seek new growth opportunities. Amid the wave of industrial relocation, numerous firms—including Foxconn, Luxshare Precision, Sunny Optical, Lens Technology, and Wingtech—are expanding into the automotive, VR, and smart home sectors.

In other words, they are not merely “escaping,” but using the Apple supply chain as a springboard to leap into new fields.

02 Attracting Foreign Investment: A Mix of Inflows and Outflows

Most people see the situation as Apple reaping the rewards while the supply chain settles for scraps, with India and Vietnam closing in from both sides.
As the industry shifts, the relocation of production bases is transforming how Apple devices are manufactured. Today, components for Apple devices are produced in multiple locations, shipped to several assembly sites, and finally delivered to customers worldwide.
Consider another set of data: In 2021, only 1% of iPhones were manufactured in India, but by 2022, that figure had jumped to 7%.
Taking the Indian market as an example, although the latest iPhone 15 model can be mass-produced almost simultaneously with the global launch, the actual number of iPhone 15 units that can be produced ultimately depends largely on securing sufficient quantities of components—the vast majority of which must be imported from China.
In recent years, many large multinational corporations—including Apple, Sony, Samsung, Nike, Hyundai Motor, and Siemens—have relocated parts of their operations or supply chains out of China to Southeast Asian countries such as Vietnam, Thailand, and Indonesia.
Additionally, some domestic companies, such as home appliance manufacturers TCL, Haier, Gree, Midea, Galanz, and Supor, have also established factories overseas, marking a shift from exporting products to exporting industrial manufacturing capabilities.
Undoubtedly, these relocations will also take some supporting enterprises in the industrial chain with them, directly leading to a decline in exports, a reduction in employment, and a slowdown in economic growth.
Objectively speaking, low-end industrial chains in mainland China are shifting toward Vietnam and India. Value creation in industry follows an inverted triangle pattern: mid-to-high-end industries at the top generate the majority of value, while low-end industries create far less value than their mid-to-high-end counterparts.
Alternatively, the distribution of value between mid-to-high-end and low-end industries follows the 80/20 or 70/30 rule: mid-to-high-end industries generate 70%–80% of the value, while low-end industries account for only 20%–30%.
In an open economic landscape, the “coming and going” of foreign-invested enterprises is a normal phenomenon.
Whether foreign capital is withdrawing or businesses are shutting down operations in China, there are underlying reasons:some stem from corporate strategic adjustments, while others result from companies lacking sufficient competitiveness to meet rising labor costs, stricter environmental requirements, and higher standards for land use efficiency in China; still others fail to align with China’s industrial layout.
Conversely, companies that can meet China’s industrial layout and development needs often possess stronger competitiveness and higher technological content. This also demonstrates that the companies choosing to invest in China are increasingly robust.
Clearly, this is also the result of positive changes in China’s environment for utilizing foreign investment.
China’s approach to utilizing foreign investment must shift from quantity to quality, from scale to efficiency, and from the low-to-mid range to the mid-to-high range—rather than simply accepting all foreign investment indiscriminately. Such an investment promotion strategy is no longer suitable for China’s economic development needs.
To put it plainly, foreign investors can choose the Chinese market, and government-run industrial parks can also be selective in attracting foreign enterprises. Moreover, when it comes to selecting foreign investment, the criteria will become increasingly stringent and the requirements ever stricter.Projects lacking technological sophistication, innovation capabilities, or market competitiveness—or those that do not align with industrial planning—will no longer be attracted.
It is precisely because the criteria for attracting foreign investment have changed that we are seeing a phenomenon of foreign enterprises “coming and going”: low-end manufacturing firms are leaving China, while a large number of mid-to-high-end foreign enterprises are entering the country. In particular, large enterprises, multinational corporations, and Fortune 500 companies have a high level of trust in China and a strong desire to invest here.

03 Investment Promotion Priorities: Attracting Foreign Capital

The so-called “theory of foreign capital withdrawal” aligns with the process of China’s industrial restructuring and economic development.
Phase One: The Trial Phase.
At that time, China had neither experience nor specific standards or requirements for attracting foreign investment; as long as it was foreign capital or a business originating from abroad, it was granted the maximum possible policy support and preferential treatment.
The primary method for attracting foreign investment was known as the “Three Inputs and One Compensation” model, which comprised processing with supplied materials, assembly with supplied parts, processing with supplied samples, and compensation trade. By today’s standards, this would hardly qualify as foreign investment.
Phase Two: The Exploration Phase.
During this period, “Made in China” rapidly gained momentum, the “World’s Factory” took shape, and “Chinese products” quickly spread across the globe. It also marked a pivotal moment in the outward shift of manufacturing from developed nations.
At the same time, China adapted to the trend of international industrial relocation and took on the transfer of manufacturing. Through this phase, China charted a path for attracting foreign investment that suited its own characteristics, thereby driving rapid economic development and strengthening its overall national power.
Phase Three: The Transformation Phase.
As China’s economic strength grew and the quality of “Made in China” improved—particularly with significant shifts in the supply and demand dynamics of resources such as land, the environment, and labor, as well as rapid changes in the international landscape—China is now undergoing a positive transformation in its approach to attracting foreign investment.
Traditional, low-end, and extensive manufacturing methods no longer meet the requirements of China’s economic development. In particular, changes in resources and the environment have placed projects and enterprises that were once within the scope of foreign investment at risk of being phased out. Under these circumstances, it is inevitable that some enterprises and projects will need to relocate overseas.
Last year, the National Development and Reform Commission (NDRC) and the Ministry of Commerce (MOFCOM) jointly released the "Catalogue of Industries Encouraging Foreign Investment (2022 Edition)." As a key policy for promoting foreign investment in China, this document provides significant guidance for optimizing the business environment for foreign investors and strengthening their confidence in long-term development within the country.
The catalog primarily focuses on manufacturing as a key area for encouraging foreign investment. It advocates for high-quality development in manufacturing, accelerates industrial transformation and upgrading, and enhances the level of industrial supply chains. For eligible foreign-invested enterprises, it offers preferential policies on taxation and land use, supports their integration into the domestic economic cycle, and helps build a development pattern for the Chinese economy featuring dual circulation between the domestic and international markets.
High-tech manufacturing is currently in a golden period of development, characterized by strong government support, vast market potential, and robust profitability, making it a primary sector for foreign investment in China.
Currently, foreign investment in China is concentrated in industries such as high-end equipment, integrated circuits, new materials, new energy, and biopharmaceuticals. The geographical distribution of foreign investment in China is gradually expanding from the Yangtze River Delta and Pearl River Delta regions to central and western cities.

Consequently, we have seen the establishment of Tesla’s R&D and Innovation Center, the launch of Schneider Electric’s four major R&D centers, the formation of Siemens’ China and East Asia headquarters, the relocation of Dassault’s Asia-Pacific headquarters from Tokyo to Shanghai, and the simultaneous establishment of R&D centers by Gaotong in both Beijing and Shanghai.
Compared to traditional low-end manufacturing, simple processing, and extensive operations, it should not be difficult to distinguish the relative merits of these projects.Can the so-called “theory of foreign capital withdrawing from China” still hold water?
The gradual exit from the Chinese market of enterprises and projects that fail to meet China’s requirements for technology, quality, standards, and product variety is merely part of China’s structural adjustment and transformation through the utilization of foreign investment—it has nothing to do with “foreign capital withdrawal.”

Even the closure of some Samsung factories in China is a result of structural changes in the Chinese market, where the competitiveness of domestic Chinese brands has rapidly improved, placing significant pressure on foreign brands.