iPhone 14 has been a joint creation of China and the United States, Apple is difficult to leave China

Chinese engineers on the rise

Apple's woes were exacerbated by travel disruptions caused by the New Crown pneumonia outbreak, which forced it to dramatically restructure its operations in 2020, abandoning its practice of sending large numbers of California engineers to China to design the flagship iPhone assembly process.

Rather than subjecting employees to long periods of isolation, Apple began decentralizing and hiring more Chinese engineers in Shenzhen and Shanghai to lead key design elements of its best-selling products, sources close to the situation said.

Apple's manufacturing and product design teams began conducting late-night video calls with their Asian counterparts. After travel resumed, Apple tried to encourage employees to return to China by offering them a $1,000-a-day stipend for two weeks of isolation and four weeks of work, sources close to the situation said. Despite being offered a stipend of up to $50,000, many U.S. engineers were reluctant to go because they were unsure how long the quarantine would take.

In the event that U.S. employees were unable to travel, Apple encouraged Asian employees to host meetings that were once hosted by their California colleagues, sources close to the situation said. Those employees are also responsible for selecting some of the Asian suppliers for future iPhone parts.

Apple is now increasingly relying on China to provide high-paying employees to do those jobs. This year, Apple posted 50 percent more jobs in China than it did in all of 2020, according to data from GlobalData, which tracks hiring trends in the tech industry. Many of these new hires are Western-educated Chinese nationals.

Significant increase in value of Chinese suppliers

Along with the restructuring of how Apple works, it is using an increasing number of Chinese suppliers. More than a decade ago, China contributed little to the value of iPhone production, providing mostly relatively cheap labor and assembling equipment using components shipped from the United States, Japan and South Korea. According to a study by Yuqing Xing, a professor of economics at the National Institute for Policy Studies in Tokyo, this work accounted for about $6, or 3.6 percent, of the value of the iPhone.

Gradually, however, China cultivated local suppliers that began to replace Apple's suppliers around the world. Chinese companies began producing speakers, cutting glass, supplying batteries and making camera modules. Now, Chinese suppliers account for more than 25 percent of the value of the iPhone, according to Xing Yuqing.

According to Dan Wang, a technology industry analyst at independent economic research firm Long Zhou Jingxun, these increases indicate that China has expanded its control of the smartphone supply chain. "This trend is not slowing down." He said.