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Apple is aiming to increase its production outside of China to minimize reliance on the country where strict Covid regulations have hampered commerce.
Based on reports, China manufactures more than 90% of Apple products such as iPhones, iPads, and MacBook computers.
Analysts say that this over-reliance on China is a possible risk because of Beijing’s repressive communist regime and its conflicts with the US.
Following Donald Trump’s trade war in 2020, the corporation became vulnerable to supply chain disruptions during the first wave of the COVID-19 pandemic.
According to Nikkei Asia, lockdowns in Shanghai and Kunshan forced Apple to halt production at three suppliers, which might have a far more significant impact – particularly the Pegatron closure.
Pegatron, which produces around 20-30% of all iPhones, announced in April that operations in Shanghai and Kunshan ceased due to regulatory rules.
Quanta, which makes MacBooks, and Compal, which makes iPads, are two more suppliers who had to close to comply with the Covid requirements.
Furthermore, Apple’s revenue for the 2nd quarter was hit hard by the Shanghai lockdown, with the corporation reporting a loss of up to $8 billion in sales.
In an earnings call, Apple CEO Tim Cook said that the constraints are around $4 to $8 billion and are primarily centered around the Shanghai corridor.
Apple CFO Luca Maestri added that the Covid-related issues also impact client demand in China.
Emerging viable alternatives for Apple
The company is reportedly targeting Vietnam or India, which are already sites for a small portion of Apple’s global production, as places to ramp up production.
Wall Street Journal (WSJ) reported that India’s iPhone production looks to rise from roughly 3% last year to 6-7% this year. India’s low labor costs and colossal market make it a more desirable alternative.
Taiwanese companies have already established facilities in India to manufacture iPhones for the Indian market, said WSJ.
However, India and Vietnam are unlikely to overtake China as Apple’s top global suppliers.
In addition, political tensions between Beijing and New Delhi may make it difficult for Apple’s Chinese contract manufacturers to set up shop in India.
Jaw de Guzman is the content producer for Comms Room, a knowledge platform and website aimed at assisting the communications industry and its professionals.
