Apple looks to boost production outside China

Apple has informed some of its China-based assemblers of its ambitions, according to the Wall Street Journal. The tech giant is apparently urging its manufacturing partners to consider shifting some production outside of China because of frustrations with the country’s strict covid-19 protocols, which have led to lengthy lockdowns of hundreds of millions of people and travel restrictions.

Apple has long relied on China for the vast majority, more than 90%, of its manufacturing. A small percentage of its products are produced in India and Vietnam. Now the Journal’s sources say that both countries have been named as potential destinations for added manufacturing.

Besides Apple, major firms like Starbucks, Dupont, and Estée Lauder have all blamed lengthy covid lockdowns for operational hurdles and slower sales. Before the pandemic, Apple was also motivated to move some of its production outside China because of its exposure to geopolitical risks.

Don’t expect a drastic or sudden change

Source: Reuters

Despite the snowballing list of reasons that China may look less attractive to US companies, some analysts say not to expect drastic or swift change.

Apple has spent decades building its assembly hubs and relationships in China, where it has access to a massive pool of skilled talent and solid infrastructure, the Journal also underlines. Plus, as with other US-based firms, making products in China gives Apple easier access to China’s enormous domestic consumer market.

“Supply chain diversification is quite tricky because people always talk about it, and boardrooms love to discuss it,” Nick Marro, global trade leader at The Economist Intelligence Unit, “but often at the end of the day people find it’s difficult to implement.”

Source: WSJ, Reuters, Quartz