Apple’s difficulty in China

To date, boosting sales in China is one of the most important achievements under CEO Tim Cook. He is a person with great merit when turning this country into a giant production area, helping to cut costs. However, the game of concentrated production gradually became risky.Apple held its annual developer event in California, USA on June 6 with much excitement, but its biggest “plays” are taking place on the other side of the world. In Shanghai and surrounding areas, Apple encountered supply chain difficulties and other problems caused by the Covid-19 blockade. The Chinese market, Apple’s huge growth engine, is also volatile.

Apple’s weakness was exposed last month, when clashes broke out at a supplier partner’s factory in Shanghai. Workers here “revolted” after a long period of isolation at the factory, where they were banned from going out in an effort to curb the spread of Covid-19.

Apple warned that disruptions due to chip shortages and China’s Covid-19 blockade will cost $ 8 billion in revenue this quarter.

According to Bloomberg’s Mark Gurman, the Zero Covid policy has affected MacBook shipments. US consumers have to wait about 2 months if they order a 14- or 16-inch MacBook Pro. Therefore, it is not surprising if the MacBook Air model that was released earlier this week will not be on the shelves in July as expected.

Apple is looking to reduce its dependence on China. In a recent investor call, Mr. Cook asserted that his supply chain is “truly global”. In fact, Apple currently produces some iPhones in India and Brazil, with plans to move some iPad and MacBook lines to Vietnam. However, the size of the regions is still small compared to China’s manufacturing empire.

Building localized supply chains is not a task that can be accomplished quickly. It took Foxconn more than three decades to reach the size it is today, thanks to a comprehensive network of component manufacturers that has expanded over time. No country has gathered the necessary components to replicate Foxconn’s iPhone assembly facility in China. During peak season, Foxconn employs several hundred thousand workers.

At the same time, China is struggling to meet its economic goals for this year. Markets are still suffering from the Zero Covid campaign. A positive for Apple is that the situation is still better than Android rivals when the iPhone production target in 2022 is not much different from 2021.

As more and more companies seek to diversify production and reduce dependence on China like Apple, it is likely that the country will eventually lose its status as the “world factory”. However, to do so will not be an easy journey.