- [Narrator] In 2008, Samsung's smartphone
manufacturing facilities were scattered throughout Mainland China. Just 15 years later, those
factories have disappeared and nearly all of them have
relocated to Southeast Asia. - It may have given Samsung
a competitive advantage to go to Vietnam first. - [Narrator] But Apple was on its heels. Over the last few years, the tech giant started making similar moves
to diversify its operations. Here's a closer look at how Samsung and Apple's manufacturing moves from China are reshaping their businesses, and what the strategies reveal about the rapidly shifting
global supply chain. In 2008, Samsung set up a plant in the Bac Ninh region of Vietnam to reduce its dependence on China. Tech industry analysts say it
was a forward thinking move for the South Korean company. - They benefited in a lot of ways. They benefit from cheaper labor
in some of these countries that they're moving to. They benefit from being insulated from some of the geopolitical tensions that come with operating in China and continuing to expand in China. They also benefit from being insulated from the kinds of supply
chain shocks that we saw during the COVID lockdowns in China and the supply chain disruptions
that resulted from that. - [Narrator] Over the next decade, rising labor and operating costs in China made it difficult for Samsung
to produce its phones cheaply. That coupled with intensifying competition from domestic smartphone rivals led Samsung's market
share in China to plummet. Meanwhile, the company was slowly moving its smartphone operations
out of the country. Since 2013, the number of
Samsung employees in China has fallen by 70%. Samsung still kept significant manufacturing centers in China, including for its expansive
memory chip business. (whooshing sound) - [Advertiser] Samsung semiconductor. - [Narrator] But moving
its smartphone operations meant to the company was shielded from many of the Trump era
tariffs on Chinese made goods. - Those tariffs coupled with
the geopolitical tensions developing between the
Western world and China led a lot of companies to reconsider where they're manufacturing things. - [Narrator] By 2019, it had- - Shut its last phone factory in the world's biggest smartphone market. - [Narrator] One year
later, the pandemic hit propelling tech companies like Apple to make similar moves away from China. - China had a very strict COVID policy that led to a lot of disruption
for many of these companies, and seriously pushed them to consider manufacturing elsewhere
where that kind of disruption would be less of a thorn in their sides. - [Narrator] Apple's plans
gained even more momentum in late 2022 after violent
protests rocked the company's largest iPhone manufacturing
plant in Guangzhou, China. (rioter speaking in Chinese) Demonstrations erupted when the workers who had been under strict
COVIDS lockdown for weeks learned bonus payments would be delayed. At the time, Apple said it
was working with the facility to ensure employee
concerns were addressed. According to analysts and people in the company's supply chain, Apple no longer feels comfortable having so much of its
business tied up in one place. While different events first propelled Samsung
and Apple out of China, their new supply chain strategies
focus on the same places, India and Vietnam. - These countries, some of
them have offered tax breaks to companies to locate
their manufacturing. There have been, in some cases,
grants and other incentives that are hard for these
companies to pass up. - [Narrator] Samsung pays
about 10% corporate income tax in Vietnam versus China's
standard 25% rate. It now produces half of
its smartphones there. Apple also has operations in Vietnam. The company started producing
its watches in the country and moved some iPad
manufacturing there too. In Apple's most recent list
of its top 200 suppliers, 25 were in Vietnam. That's 25% higher than four years ago. Then, there's India. Around 20 to 30% of all
of Samsung smartphones are now manufactured there,
according to Morgan Stanley, and it's still expanding. In 2022, it opened the world's
largest mobile phone factory near New Delhi. These moves helped the company
to become a dominant force in India's rapidly
growing smartphone market. The second largest in
the world behind China. - [Advertiser] Awesome Galaxy A14 5G. Now at just rupees 44 per day. - [Narrator] In 2022, Samsung
accounted for around 20% of the country's total market share while Apple held less than 4%. Apple is working to change that. In a recent earnings
call, CEO Tim Cook said. - India is an incredibly exciting market. It's a major focus for us. - So, this year Apple has
said it plans to manufacture a portion of its iPhone 14 models in India for the first time which
is a significant move. You know, the company
is essentially saying that we wanna diversify. - [Narrator] Tech analysts
say manufacturing iPhones in India and then selling
them to the surrounding Southeast Asian market ensures a smooth and more resilient supply chain. Apple's longer term goal is to ship 40 to 45%
of iPhones from India, according to supply chain analysts. In 2022, that number
was in the single digits for the company. More recently, the company
started moving manufacturing even closer to home. A multi-billion dollar deal
with US Chipmaker Broadcom will allow Apple to source
critical chip components from manufacturing hubs around the US. But even as Apple and
Samsung spend billions to move away from China, the manufacturers may still
depend on suppliers there. During the height of the 2020
COVID19 outbreak in China, Samsung found itself scrambling to secure suddenly scarce
Chinese components. - There's also a political challenge because these companies many of them still need to manufacture
in China to some extent, and they need to be delicate about how they handle
diversifying their supply chains. - [Narrator] Even though
a supply chain shift won't happen overnight, Samsung and Apple's
manufacturing strategies reveal a larger de-risking trend that's transforming global markets. - It's kind of like diversifying
a portfolio, if you will. Increasingly, as the US and China, that relationship becomes more contentious and a lot of western companies
see China as more risky. And so, they're thinking
about doing less in China. They're thinking about
de-risking from the perspective of the politics in this situation. (gentle upbeat music)
