Sat. Oct 1st, 2022

Apple Inc has notified several of its contract manufacturers that it wants to boost manufacturing outside of China as a result of Beijing’s harsh anti-Covid policies, according to the Wall Street Journal, citing individuals familiar with the situation.

According to the article, India and Vietnam, both of which currently produce Apple products, are being considered as alternatives to China.

This move by Apple, the largest US company by market capitalization, will have an impact on other Western companies considering reducing their reliance on China for manufacturing or key materials in the wake of Beijing’s indirect support for Russia’s invasion of Ukraine and city-wide lockdowns to combat Covid-19.

According to experts, independent contractors produce over 90% of Apple products, including iPhones, iPads, and MacBook computers, in China.

Tim Cook, Apple’s CEO, remarked in April in response to the company’s supply chain problems, “Because our supply chain is really global, our goods are built all over the world. We’re still looking for ways to improve.”

Many Western firms’ supply chains have been hampered by the lockdowns imposed in Shanghai and other locations as part of China’s anti-Covid stance.

Apple warned in April that the reappearance of COVID-19 may stymie sales by up to USD 8 billion this quarter. Apple has been unable to send its executives and engineers into China for the past two years because to China’s rigorous anti-Covid regulations, making it difficult for them to inspect production locations in person. Last year’s power disruptions tarnished China’s reputation for dependability.

Except for India, China is the only Asian country with a pool of skilled employees that surpasses the population of several other Asian nations.

According to the Wall Street Journal, which cited people familiar with the situation, Apple views India as the next China since both countries have similar populations and provide low costs. According to sources familiar with the situation, Apple is in talks with several existing suppliers about expanding in India, including export production.

According to research firm Counterpoint, India produced 3.1% of the world’s iPhones last year, and the percentage is expected to rise to 6% to 7% this year.

According to some analysts and suppliers, China-based assemblers may have problems setting up business since relations between New Delhi and Beijing have worsened since the military of the two nations conducted a fatal conflict in 2020. According to sources familiar with the situation, China-based manufacturing contractors doing business with Apple are looking for opportunities in Vietnam and other Southeast Asian countries.

On the other hand, Apple’s competitor, Samsung Electronics Company, already has a smartphone production facility in Vietnam. Samsung, located in South Korea, has minimised its exposure to Chinese manufacturing.

Luxshare Precision Industry Co., a Chinese contract manufacturer, is already producing Apple’s AirPods earphones in Vietnam. Even Luxshare’s clients are concerned about power supply concerns and China’s zero-covid policy. These clients, according to Luxshare, are requesting manufacturing partners to explore outside of China for essential preliminary work for mass production, known as new product introduction, or NPI.

Foxconn Technology Group and Wistron Corp., both located in Taiwan, have previously established plants in India to make iPhones primarily for the country’s domestic market, where Apple sales are quickly increasing.

Apple announced in April that it has started manufacturing the current generation of iPhones and the iPhone 13 series in India.

Analysts and suppliers say such initiatives demand significant investment from suppliers, which makes them nervous at a time when the global economic picture is clouded by high commodity prices, the Ukraine conflict, and stock market gyrations.

Cash is vital in uncertain times, according to a contractor executive, but if suppliers want to preserve the business, they must follow Apple’s lead.

By adele rose

Adele Rose is the senior editor and employee of WGBS Pvt Ltd Digital wing.

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