China’s large Covid epidemic poses an increasing danger to Apple’s profitable iPhone business.
The business has been dealing with issues at Foxconn’s 300,000-employee factory in Zhengzhou, China – the primary iPhone assembler – since a wave that began in October.
Experts believe that the huge outbreak, which, according to stolen Chinese health documents, sickened 250 million individuals in the first two weeks of December, might cause months-long disruptions in the production of iPhones, even as the corporation moves production outside of China.
The California-based business has been working with its suppliers to shift some manufacturing to other factories in China to reduce the extended wait times affecting U.S. buyers for the high-end iPhone 14 models it introduced in September.
China imposed a lockdown on six million people at the beginning of December, allowing them to leave only to purchase food or for medical care, in response to demonstrations about Covid restrictions and pay by hundreds of workers in Zhengzhou.
These demonstrations resulted in unusual viral photographs of workers and security forces wielding batons and wearing hazmat suits clashing.
According to the Financial Times, analysts predict Apple’s quarterly revenue would dip to slightly below the record $123.9 billion it reached during the same period last year. This would end a 14-quarter revenue growth streak.
Horace Dediu, an independent analyst at Asymco, stated that Apple’s manufacturing troubles of the past few months could be followed by a demand crisis in China as customers alter their buying patterns.
Dediu told the FT that even while the rest of the globe observed an increase in demand during lockdowns, it was due to work-from-home and stimulation. With poor immunity and few safety nets, Chinese consumers may avoid large purchases in the coming year.
It will take time for Apple’s suppliers in Taiwan, including Foxconn and others, to relocate some production to Indian manufacturers. One analyst told the Financial Times that India might produce 18% of iPhones by 2024, up from the current 7-8%.
According to TF International Securities analyst Ming-chi Kuo, Apple hopes to ship as much as 45 percent of its goods from India in the long run.
China’s zero-Covid lockdowns, which were just removed, along with fewer effective vaccines and lower vaccination rates across segments of the population have rendered the nation susceptible and ill-equipped to handle labor shortages.
Bindiya Vakil, chief executive officer of Resilinc, a California-based company that tracks a wide variety of components to provide supply chain mapping services, told a business publication that absenteeism should affect a large number of operations, not just at factories, but also at the warehouse, distribution, logistic, and transportation facilities.
Due to China’s immaturity in handling Covid, the next two to six months will be a decisive moment for Apple’s supply chain, Alan Day, chair of State of Flux, a London-based supply chain consultant, told the Financial Times.
The rest of the world has set standards, but China has done almost little to encourage businesses to use them.
