Apple, along with most tech companies that relied on China for the manufacturing of their devices, had started to move a portion of their production facilities to other countries as part of their China Plus One policy. Now, Apple is planning to diversify and transfer a portion of its supply chains as well away from China.
While Apple had moved a significant portion of the iPhone 14 series to factories in India and other countries, these factories still relied on China for the supply of most of the major components. Barring a few components that were made in Taiwan, most of the hardware that goes into making an iPhone is still produced locally in China. Apple now wants to set up different supply chain routes and systems that would enable them to further reduce their dependency on China.
The Wall Street Journal this weekend reported that Apple has recently ‘accelerated’ plans to expand production outside of China. Primary iPhone assembly facilities have been repeatedly disrupted by China’s strict COVID-19 policy, coming to the fore most notably in November with mass worker protests.
Moving the production of iPhone out of China has been a complicated process, and one that will take more time. While moving the final assembly plants outside the country has been easy, moving the production plants of components that make up the iPhone will be a lot more difficult.
The manufacturing infrastructure and large cheap labour force that China offers is hard to find elsewhere although countries like India have stepped up and responded well tho this. What is even more difficult for Apple is to recreate the supply chains that factories in China enjoyed, and move the production of unfinished components to other countries.
Apple will need to build up similar supply chains in countries like India, gradually over time to meet the iPhone’s scaling demands. Eventually, Apple is expected to shift up to 40% of iPhone production to other countries.
In early November, Apple warned that shutdowns at primary assembly facilities in Zhengzhou, China will have a significant impact on the availability of iPhone 14 Pro and iPhone 14 Pro Max this holiday season. Despite curtailing their production estimates by millions of units this year, it seems that Apple will miss their shipment goal for the iPhone 14 Pro by about 20 million units.
This has seriously hurt Apple’s revenue projections as they are set to miss out on a number of potential customers who usually wait for the holiday season for buying the latest iPhones each year.
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