Apple Inc. has reportedly told some of its contract manufacturers that it now wants to increase the production of its products outside China.
This is because Beijing is currently under strict anti-COVID measures, delaying the production of iPhones and Mac.
Apple Makes India its New Hub
According to The Wall Street Journal, India and Vietnam, which are already sites of the tech giant's production, are among the countries being seen as alternative options to China.
This move by Apple, being the largest U.S. company by market capitalization, will influence the thinking of other U.S. companies which have been considering reducing their dependency on China for manufacturing or key materials.
This is in the wake of the country's indirect support to Russia for its invasion in Ukraine and lockdowns in some cities due to COVID-19 cases.
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According to analysts, over 90% of Apple products, including iPhones, iPads, and MacBook laptops, are manufactured in China by outside contractors.
In April, Apple's Chief Executive Officer Tim Cook talked about the company's supply chain challenges. He said their supply chain is global, and the products are made everywhere. They will continue to look at optimizing.
The lockdowns imposed in Shanghai, China, and other cities as part of the country's anti-COVID policy have disrupted the supply chain for a lot of Western companies.
In May 2021, the production of the Apple iPhone 12 in India was affected after workers were hit with COVID-19.
Decrease in Apple Product Output in China
In April, the tech giant warned that the resurgence of COVID-19 will hinder the sales by as much as $8 billion in the current quarter, according to Reuters.
China's strict anti-COVID rules have stopped Apple from sending its executives and engineers into the country since 2020, which means it has become harder for them to check the production sites in person.
The power outages in 2021 also dented the country's reputation for reliability.
Except for India, China was the one who has a pool of qualified workers that exceeded the entire population of other alternative countries in Asia.
Apple sees India as the closest thing to the next China, as both of them are similar in population and both offers low cost. Apple is currently in conversation with some existing suppliers about expanding in India, including production for export.
India made 3.1% of the world's iPhones in 2021, and the proportion is forecast to increase to 6% or 7% in 2022, according to Business Standard.
According to some analyst and suppliers, there will be a difficulty for the assemblers based in China when it comes to setting up the shop as the relationship between New Delhi and Beijing have deteriorated since the two countries' militaries fought a deadly clash in 2020.
This was the reason that China-based manufacturing contractors who are in business with the tech giant is seeking Vietnam and other Southeast Asian nations.
Vietnam, on the other hand, is already a smartphone manufacturing hub for Apple's market rival, Samsung Electronics.
Luxshare Precision Industry Co., a manufacturing contractor based in China, is already making the Apple AirPods in Vietnam. Even Luxshare's clients are worried about the issues with the power supply and China's zero-COVID policy.
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Written by Sophie Webster
