Apple warns suppliers about Chinese revenge for Pelosi meeting; may affect iPhone shipments

Apple has reported reports about a further act of Chinese revenge for this week’s controversial visit to Taiwan by the speaker for the US House of Representatives, Nancy Pelosi. China’s response may disrupt shipping of iPhones and/or their components.

China has expressed its extreme displeasure at the visit, applying a whole raft of measures – ranging from imposing sanctions on Pelosi and her family, to live-fire military exercises within Taiwan’s waters. Now a further measure of revenge has been revealed which is reportedly disrupting iPhone production…

Background

We reported earlier this week that Pelosi had met with Apple chipmaker TSMC during her visit, and it later emerged that she also met with iPhone assembler Pegatron.

Pelosi’s visit to Taiwan was intended to show US support for Taiwan at a time when there are worrying about a possible invasion by China. It was designed to signal to Beijing that the US is serious in its legal commitment to help Taiwan defend itself against any military attack by China.

However many have expressed concern that the visit was more likely to provoke China than to deter, and it’s become clear that the visit was this is the case.

Pelosi’s meeting with TSMC was likely in regard to the CHIPS Act, and the implications for the company’s Arizona plant. The Taiwanese company was reportedly concerned at suggestions that Intel might get the lion’s share of the subsides.

Chinese revenge affecting iPhone shipments

We’ve since learned that Pelosi also met with Taiwanese iPhone assembler Pegatron; There have since been reports that China was blocking shipments to and/or from Pegatron’s Chinese plants.

Apple has warned its suppliers that China is enforcing a customs regulation which could lead to import and export requests being refused. Reuters reports.

The iPhone maker told suppliers that China had started enforcing a long-standing rule that Taiwanese-made parts and components must be labeled as made either in “Taiwan, China” or “Chinese Taipei”, the report added, citing sources familiar with the matter .

The rule has so far been ‘more honored in the breach than the observance,’ but this has now changed, with China insisting on strict compliance.

There are currently conflicting reports about whether the shipment delays are affecting both imports and exports to and from China, or only movements of parts between Taiwan and China.

While Apple’s products are labeled “Designed by Apple in California, Assembled in China,” it’s possible that shipping documents would describe their origin as Taiwan. It seems likely that only the paperwork would need to be changed in order for shipments to be permitted.

If the issue affects the shipping of components from Taiwan for assembly in China, then the issue will be easy to resolve if it merely involves paperwork, but would be far more disruptive if any of the components themselves are labeled as “Made in Taiwan.”

Pegatron is said to have denied that her shipments are affected, but the wording of her responses to media requests appears to be ambiguous. It is variously reported that the company’s statement says its plant are operating normally (which would be the case either way); that shipments from its Chinese plants were unaffected; or that all shipments (including exports) were proceeding as normal.

Either way, the timing of the disruption is not great for Apple as it ramps up iPhone 14 production work prior to the launch of this year’s line-up next month.

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