After a thorough study of changes in global trade, JPMorgan strategists concluded that some of Apple’s Chinese suppliers could benefit from trends in supply chain diversification. The October 18 report examined 10 aspects of “massive supply chain relocation and the rise of trading blocs.” Analysis ranges from concerns about China’s dominance in global supply chains and overcapacity to U.S. policy. U.S.-China tensions and talk of “decoupling” emerged during President Donald Trump’s first term. Calls for supply chain diversification have increased during the COVID-19 pandemic. Republican candidate Trump has threatened to impose 60% tariffs on China if he is re-elected next month. Democratic candidate Kamala Harris is expected to maintain the Biden administration’s tough stance on Chinese tech, calling for high-end manufacturing to return to the United States and saying, “Tariff War 2.0 is also likely to accelerate the pace of global supply chain relocation.” said a JPMorgan analyst. . The report said: “Our emerging market equity strategy team has identified MSCI (India, ASEAN and Mexico) as potential beneficiaries of supply chain repositioning and manufacturing growth in their respective markets. “We’re focusing on some of the emerging companies.” “Additionally, we highlight the names of companies that could benefit from Apple’s supply chain relocation,” the report said. Apple plans to increase iPhone production in India, but some of its Chinese suppliers are investing in factories overseas. Analysts’ list of beneficiaries of supply chain diversification included three companies trading in mainland China: Wingtech Technology, Luckshare Precision Industries and Gotec. JP Morgan rates WingTech and Luxshare as Overweight, but is neutral on GoreTech. The three companies already manufacture in many parts of the world outside of China, according to their websites. According to Apple’s latest supplier list, the company is acquiring from GoerTek and Luxshare in Vietnam as well as China. According to last year’s supplier list, Apple bought from Wingtech’s factories in Malaysia and the Philippines. The latest version only listed Wingtech’s business in China. Other Chinese suppliers are also expanding overseas with their customers. Shenzhen-based smartphone company Oppo said it also helped about 10 suppliers relocate to Indonesia when it opened a factory there. Chinese companies’ overseas revenues have increased in recent years, and a portfolio of companies with high overseas sales exposure generated an annualized alpha of 9.5% from 2019 to 2023, Bernstein analysts said in this month’s China in a report on global manufacturing development. “We believe this will become an important revenue source for investors going forward as Chinese companies expand globally and leverage low-cost, high-quality product strategies outside of China,” the analysts said. Ta. Apple supplier Luxshare is also one of their top choices. Bernstein rates the stock as outperforming his price target of 50 yuan ($7.02), which is 15% above Friday’s closing price. LuxShare “has a significant presence in Vietnam and is involved in assembling Apple’s wearable products and other businesses outside of Apple. Overseas production capacity represents approximately 25% of LuxShare’s overall production capacity,” Bernstein said. said the analyst. But when it comes to Apple’s iPhone, Bernstein analysts are less optimistic about whether India can become a viable alternative to China. They expect Luxshare to gain market share in smartphone assembly in China. Apple is scheduled to release its quarterly results on October 31st. —CNBC’s Michael Bloom contributed to this report.
Apple’s Chinese suppliers could benefit from US trade tensions
