Apple is taking small steps toward India. But the production of its latest phone, set for introduction on Wednesday, shows how difficult it will be to make big changes.

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By Tripp Mickle

Tripp Mickle has written about Apple and the technology industry for six years. He reported this story from San Francisco.

This fall, Apple will make some of its flagship iPhones outside of China for the first time, a small but significant change for a company that has built one of the most sophisticated supply chains in the world with the help of the Chinese authorities. But the development of the iPhone 14, which is expected to be unveiled on Wednesday, shows how complicated it will be for Apple to truly untangle itself from China.

More than ever, Apple’s Chinese employees and suppliers contributed complex work and sophisticated components for the 15th year of its marquee device, including aspects of manufacturing design, speakers and batteries, according to four people familiar with the new operations and analysts. As a result, the iPhone has gone from being a product that is designed in California and made in China to one that is a creation of both countries.

The critical work provided by China reflects the country’s advancements over the past decade and represents a new level of involvement for Chinese engineers in the development of iPhones. After luring companies to its factories with legions of low-priced workers and unrivaled production capacity, the country’s engineers and suppliers have moved up the supply chain to claim a bigger slice of the money U.S. companies spend to create high-tech gadgets.

The increased responsibilities China has assumed for the iPhone could challenge Apple’s efforts to decrease its dependency on the country, a goal that has taken on increased urgency amid rising geopolitical tensions over Taiwan and simmering concerns in Washington about China’s ascent as a technology competitor.

Chinese companies with operations in India will still play a key role in Apple’s plan to make some iPhones in the country. In Chennai, India, the Taiwanese supplier Foxconn, which already manufactures iPhones in factories throughout China, will lead Indian workers’ assembly of the device with support from nearby Chinese suppliers including Lingyi iTech, which has subsidiaries to supply chargers and other components for iPhones, according to two people familiar with the plans. China’s BYD is setting operations to cut glass for displays, as well, these people said.

“They want to diversify, but it’s a hard road,” said Gene Munster, managing partner of Loup Ventures, a technology research firm. “They depend on China for so much.”

Apple declined to comment. Foxconn, BYD and Lingyi iTech didn’t immediately respond to requests for comment.

Covid-related disruptions have exacerbated Apple’s predicament. When China closed its borders in 2020, Apple was forced to overhaul its operations and abandon its practice of flying hordes of California-based engineers to China to design the assembly process for flagship iPhones.

Instead of subjecting staff to lengthy quarantines, Apple began empowering and hiring more Chinese engineers in Shenzhen and Shanghai to lead critical design elements for its best-selling product, according to the four people familiar with the operations.

The company’s manufacturing and product design teams began holding late-night video calls with counterparts in Asia. After travel resumed, Apple tried to encourage its staff to return to China by offering a stipend of $1,000 a day during their two weeks of quarantine and four weeks of work, these people said. Though the payout could be as much as $50,000, many engineers were reluctant to go because of uncertainty over how long they would have to quarantine.

In the absence of travel, the company has encouraged staff in Asia to lead meetings that their colleagues in California once led, these people said. They also assumed responsibility for the selection of some Asian suppliers of future iPhone parts.

The company is now increasingly tapping China to supply high-wage workers to do these jobs, these people said. This year, Apple has posted 50 percent more jobs in China than it did during all of 2020, according to GlobalData, which tracks hiring trends across tech. Many of those new hires are Western-educated Chinese citizens, these people said.

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