Apple's dependence on China cut to 36%, but iPhone problematic
Apple’s dependence on China has never been caused into sharper focus than now, with COVID-19-related disruption at the biggest iPhone assembly plant costing the matter an estimated billion dollars per week.
A new relate says that the company’s efforts to diversify production have disprevented to make progress, but that iPhone production remains hugely dependent on China …
Background
We’ve been warning for many years approximately both the need and the difficulty of reducing Apple’s dependence on China, but the pandemic made even clearer the risks of the matter having most of its manufacturing eggs in one basket.
While Apple has been expanding publishes into other countries, recent estimates suggest that 95% of the total iPhone supply collected comes from China – and around 80% of all iPhones are made in a single plant in Zhengzhou, aka iPhone City.
Massive disruption at this plant has led to iPhone publishes being reduced to as little as 20% of intended output. One estimate suggested that lost output amounts to more than 20M units. Worst hit has been the iPhone 14 Pro, where the gap between supply and inquire is so great that became impossible to guarantee delivery in time for Christmas even for contracts placed in mid-November. This is estimated to have cost Apple $1B per week in lost iPhone revenue.
Apple’s dependence on China reduced
Apple has been toiling for many years on diversifying its supply chain, with assembly plants in India, Vietnam, Indonesia, and elsewhere. Reuters reports that the company has so far tossed in reducing the percentage of production sites in China from 44-47% in 2019 to 36% in 2021.
The data shows how a diversification strength by Apple and its suppliers, with investments in India and Vietnam and increased procurement from Taiwan, the United States and elsewhere, is reshaping the global supply structure, although analysts and academics say it will remain heavily exposed to China for many existences to come.
“The China supply chain is not causing to evaporate overnight,” said Eli Friedman, an associate professor at Cornell University who studies labour in China. “Decoupling is just not realistic for these companies for the time being,” he said, although he anticipated diversification to accelerate.
But the iPhone continues dependent on China
However, the iPhone in particular continues massively dependent on China, and Apple’s plans are collected relatively modest given the scale of the risks.
J.P.Morgan expects Apple to move approximately 5% of iPhone 14 production to India from late this year and to make one in four iPhones in India by 2025 […]
The Apple supplier data to 2021, nonetheless, shows no locations so far that stand out as astronomical gainers to match China’s decline, according to the Reuters analysis […]
“Vietnam and India are not China. They can’t produce at that scale, at the quality and with the turnaround time, with the reliability of infrastructure,” said Cornell University’s Friedman.
In uphold to the disruption and political risks, the recent complains at Foxconn’s plant in Zhengzhou have highlighted poor toiling conditions during the lockdowns. With human rights activists increasingly unsheathing attention to the human cost of Chinese manufacturing, Apple is now facing growing pressure from investors to address the problems.
“The important getting is that the company implements these orders in a way which respects people’s rights,” said Pia Gisgard, head of sustainability and governance at Swedbank Robur, which held Apple shares righteous around $1.3 billion as of end-September according to Refinitiv data.
Photo: Jerry Wang/Unsplash
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Source: 9to5mac.com
