Building Apple Products Has Become a Side Hustle for China’s Biggest EV Maker

BYD: A Tale of Innovation and Transformation

Apple products proudly proclaim “assembled in China” on their packaging, yet the identity of the assemblers often remains cloaked in mystery. Recent revelations uncover that one of those assemblers is none other than BYD, China’s largest electric vehicle (EV) manufacturer and a vital competitor to Tesla. Distinctively, BYD has ventured beyond automotive manufacturing, establishing its presence in the electronics industry and now assembles more than 30% of Apple’s iPads, as reported by industry insiders and analysts.

With a workforce exceeding 100,000 employees, including over 10,000 engineers dedicated specifically to the “fruit chain”—the local term for Apple’s supply chain—BYD stands poised to leverage its dual identity as both a renowned carmaker and a contract electronics manufacturer. Executives at BYD suggest that their core competencies in manufacturing precision devices at low costs are beneficial across both sectors.

Apple’s Growing Reliance on Chinese Partnerships

Apple’s increasing dependence on BYD and iPhone assembler Luxshare underscores the challenges of detaching from Chinese manufacturing. This reliance comes amid escalating U.S. efforts to limit imports from China, which could intensify further in a potential second Trump administration. In light of growing geopolitical tensions, Apple has been actively diversifying its supply chain to include countries like India and Vietnam. However, the company continues to seek Chinese partners for their expertise. “We could not do what we do without them,” remarked Apple CEO Tim Cook during a visit to Beijing, his third trip to China that year.

Interestingly, both electric vehicles and smartphones share remarkable similarities. They are adeptly driven by technologies relating to batteries, chips, and software, fostering a climate of collaboration in China that blurs the lines between the two industries. BYD also serves various clients, including Xiaomi, known for both smartphones and new sedans, exemplifying a growing trend of cross-industry partnerships and innovation.

The Intersection of Electronics and Auto Manufacturing

During a visit to Shanghai earlier this year, Cook and BYD’s founder Wang Chuanfu engaged meaningfully at Apple’s office, where Wang presented a miniature model of the iPad production system. Cook recognized BYD as one of Apple’s suppliers “pushing the boundaries of what’s possible.”

While Apple has shelved ambitions of manufacturing its own EV, its collaboration with BYD serves as a pivotal move to reduce reliance on Foxconn, the Taiwanese assembler synonymous with the bulk of iPhone and iPad production. Despite BYD’s growing portfolio, it appears to primarily focus on components rather than completing iPhone assembly. Industry experts assert that BYD is taking on a more significant role in the production of iPhone parts, including high-profile components such as the titanium frame.

BYD’s Exponential Growth in the EV Space

BYD’s recent achievements have been noteworthy, as the company reported third-quarter revenue of approximately $28 billion, surpassing Tesla’s $25 billion for the first time. This milestone was significantly bolstered by BYD Electronic, the firm’s contract-manufacturing division, generating about $6 billion during the same period. Founded three decades ago by a chemist named Wang, BYD began as a battery manufacturer before receiving a substantive investment from Warren Buffett’s Berkshire Hathaway in 2008.

Historically, BYD faced scrutiny regarding its innovative practices, often accused of imitation and embroiled in legal disputes with international corporations like Sony and Foxconn—these legal battles are a testament to the company’s complicated yet evolving relationship with global giants. BYD’s engagement with Apple commenced around 2009, progressively establishing trust and responsibilities that now encompass various production components, including structural elements like glass and ceramics.

The Road Ahead: Diversification and Innovation

In BYD’s 2019 annual report, there were indications of a significant advancement in its dealings with a major North American client, a reference widely interpreted as an acknowledgment of Apple amidst the emergence of iPads produced by BYD. Today, BYD Electronic, separately listed on the Hong Kong stock exchange, manages sensitive production tasks for Apple, such as crafting titanium components for the latest iPhone Pro models.

The company boasts impressive capabilities in precision manufacturing, including advanced techniques enabling the production of detailed patterns on eggshells without damage. BYD continues to expand through strategic acquisitions, such as last year’s $2 billion purchase of manufacturing facilities in two Chinese cities from Apple supplier Jabil.

Looking forward, BYD aims to diversify its manufacturing base beyond China, evidenced by its existing operations in India producing smartphones for brands like Xiaomi. The potential for expansion in other markets, depending on Apple’s requirements, remains open. Furthermore, BYD indicates future growth will entail developing AI-driven automation solutions alongside Nvidia for its manufacturing processes.

In the words of BYD battery executive Wang Haoyu, “It is like we are raising many fish in a pool, and honestly, we’re not entirely sure which area of the market will mature in the future. When a fish matures, we can scoop it out.” This philosophy underscores BYD’s strategic vision as it positions itself at the intersection of electric vehicles and electronics, continually adapting to the ever-evolving technology landscape.