The Wall Street Journal reported over the weekend that Apple had recently “accelerated” its plans to expand production outside of China. Major iPhone assembly facilities have been repeatedly disrupted by China’s tough COVID-19 policy, including in November with massive worker protests.
The report indicates that the main sites of interest for expansion are India and Vietnam, regions where Apple already has significant production bases with its supply chain partners.
Apple already produces some older iPhone models at facilities in India and Brazil. Vietnam is home to facilities run by Luxshare and Inventec, Apple’s main assembly partners for AirPods and HomePods products.
But the Foxconn facilities in China responsible for assembling the iPhone dwarf everything else by an order of magnitude.
Moving iPhone production out of China is a complicated process that will take a long time. The manufacturing infrastructure and large, cheap labor that China offers are hard to find elsewhere and will need to be developed incrementally over time to meet the scale demands of iPhone. Eventually, Apple should transfer up to 40% of iPhone production to other countries.
The Journal says Apple wants its suppliers to do more NPI (new product introduction) work outside of China, to build advanced manufacturing ecosystems in countries like India. However, that is easier said than done. The report says the weak global economy and slowing Apple hiring aren’t helping matters.
Reliance on China came under severe strain following the US-China trade wars circa 2016, but Apple managed to navigate this geopolitics relatively unscathed. It has been less successful in avoiding post-pandemic disruption. China continues to enforce strict zero-tolerance lockdown measures to contain COVID-19 outbreaks. These measures have crippled iPhone factories several times over the past two years.
In early November, Apple warned that the closures of major assembly facilities in Zhengzhou, China will significantly impact the availability of the iPhone 14 Pro and iPhone 14 Pro Max this holiday season. Right now, the online Apple Store is quoting post-Christmas delivery times for new iPhone 14 Pro orders. Analysts estimate this will result in billions of dollars in lost sales.
In addition to supply chain effects, Apple’s relationship with China is coming under increasing scrutiny. He recently came under fire for limiting the availability of AirDrop, a tool protesters have often used to share information critical of the Chinese government.
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