Manzana intends to diversify its production line to no longer depend almost exclusively on Chinaas reported The Wall Street Journal. The Cupertino company would have already entered into conversations with some of its suppliers to analyze the possibility of establishing new facilities in other Asian countries, and transferring part of the manufacture of its most important devices, such as the iPhone, iPad and Mac, there.
The aforementioned report mentions that Apple’s intention would not be to completely divest from China. After all, the Asian giant is one of the main markets for the Californian firm and represents a fifth of its global sales. However, the recent health restrictions in the face of outbreaks of COVID-19 in key hubs such as Shanghai, added to previous problems such as energy and semiconductor shortages, would have triggered alarms in the company led by Tim Cook.
Today, over 90% of Apple products are made in china. This means that any new interruption in the production line can translate into very important losses for the company. Those from Cupertino come from reporting formidable financial results, with revenues of $97.3 billion in Q2 of the fiscal year; however, they have already warned that the coronavirus restrictions could cost them up to $8 billion in sales during the current quarter.
On the other hand, the lockdowns imposed by the Chinese authorities due to the pandemic have prevented Apple from carrying out more exhaustive checks on the state of the production line. The company used to send delegations of managers and engineers to check first-hand how its devices were manufactured, something that has not been possible in recent years; at least to the level intended by Apple.
Apple would welcome moving part of its production to India and Vietnam
One of the most feasible options for Apple to move part of its production out of China would be India. Those from Cupertino would see that country as one of the most appropriate alternatives, especially for its low production costs and large workforce.
In fact, the company has already had a presence in said territory since 2017, when the iPhone SE began to be manufactured there. In addition, in April it was confirmed that Foxconn already produces the iPhone 13 in the country. It is clear that not everything has been rosy for Californians in India; In December, they closed one of the facilities where their smartphones are produced due to worker protests and poor living conditions.
However, it is clear that Apple sees this country as a productive territory with great potential. According to WSJ, the company has already talked to some suppliers to expand to India, including exporting from there to other parts of the world. The main problem of companies based in China is the poor relationship between the authorities of their country and their Indian peers, mainly because of a border dispute.
As to VietnamMeanwhile, Californians would also see it as an attractive alternative. Some of the components used in the iPhone already come from that country, so Apple already knows its companies. But they might as well lean for their experience in producing devices for other companiesespecially Samsung standing out.
It takes a lot of money, plus goodwill
Although it is not mentioned when Apple would intend to mobilize part of its production outside of China, it is indicated that those from Cupertino were considering this possibility. since before the pandemic. However, COVID-19 forced to change —or abort— any plans that might have existed at the time. But as we said at the beginning, the persistent inconveniences for its suppliers to be able to work normally have once again triggered the interest in diversifying its production line.
The great challenge that both Apple and the companies it subcontracts will have to face will be economic. Developing the facilities and logistics necessary to meet the needs of the Californian firm does not only require goodwill, but also a lot of money. And in a panorama of international uncertainty due to rising inflation, the war between Russia and Ukraine, the shortage of chips and price increases, it remains to be seen who is willing to make that effort.
Apple is a client that no company wants to lose and that will also be a crucial point to evaluate the next steps to follow.