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Apple, along with most tech companies that relied on China for manufacturing 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 many of its supply chains 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 to supply most of the major components. Barring a few features 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 reduce their dependency on China further.
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 the 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 much more difficult.
China’s manufacturing infrastructure and sizeable cheap labor force are hard to find elsewhere, although countries like India have stepped up and responded well to this. 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 to meet the iPhone’s scaling demands. Eventually, Apple will shift up to 40% of iPhone production to other countries.
In early November, Apple warned that shutdowns at primary assembly facilities in Zhengzhou, China, would significantly impact 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 Apple will miss their shipment goal for the iPhone 14 Pro by about 20 million.
This has seriously hurt Apple’s revenue projections as they are set to miss out on several potential customers who usually wait for the holiday season to buy the latest iPhones each year.
