Apple To Choose India, Vietnam Over China For Production Of iPhone, iPad, MacBook: Report

Washington: Apple Inc has told some of its contract manufacturers that it wants to increase the production outside China, amid Beijing’s strict anti-COVID measures, the Wall Street Journal reported, citing people familiar with the matter. India and Vietnam, where Apple already has production sites, are among the countries that are being seen as an alternative option to China, the report added. According to analysts, over 90 per cent of Apple products including iPhones, iPads and MacBook laptops are manufactured in China by outside contractors.Also Read – India Squad For South Africa: 5 Players Who Missed Out Narrowly | IND vs SA T20I Series 2022

Now this move by Apple, being the largest US company by market capitalization, is expected to influence the thinking of other Western companies which have been considering reducing their dependency on China for manufacturing or key materials in the wake of Beijing’s indirect support to Russia for its invasion in Ukraine and lockdowns in some cities to fight COVID-19. Also Read – What Is Joe Biden’s IPEF? What Role Will It Play In Indo-Pacific? | Explained

Responding to Apple’s supply chain challenges in April, Chief Executive Officer Tim Cook said, “Our supply chain is truly global, and so the products are made everywhere. We continue to look at optimizing.” Also Read – This Country Extends Work From Home Order As COVID Cases Continue to Rise, Strict Curbs Imposed | Key Points

The lockdowns imposed in Shanghai and other cities as part of China’s anti-Covid policy have disrupted the supply chain for many Western companies.

In April, Apple warned that the resurgence of COVID-19 will hinder sales by as much as USD 8 billion in the current quarter. China’s strict anti-Covid rules have stopped Apple from sending its executives and engineers into the country over the past two years, which means that it becomes hard for them to check the production sites in person. The power outages last year also dented China’s reputation for reliability.

Except for India, China was the one which have a pool of qualified workers that exceeds the entire population of many alternative countries in Asia.

Apple sees India as the closest thing to the next China, as both of them are similar in population and both offers low cost, Wall Street Journal reported citing people who are familiar with the matter. Apple is in conversation with some existing suppliers about expanding in India, including production for export, people familiar with the matter said.

India made 3.1 per cent of the world’s iPhones last year, and the proportion is forecast to increase from 6 per cent to 7 per cent this year, according to research firm Counterpoint.

According to some analyst and suppliers, it will be difficult for the China-based assemblers to set up the shop as the relationship between New Delhi and Beijing have deteriorated since the two countries’ militaries fought a deadly clash in 2020. This was the reason that China-based manufacturing contractors who are in business with Apple are seeking Vietnam and other Southeast Asian nations, according to people familiar with the matter.

Vietnam, on other hand, is already a smartphone manufacturing hub for Apple’s rival, Samsung Electronics Company. South Korea-based Samsung has limited its exposure to China manufacturing.

Luxshare Precision Industry Co., a China-based manufacturing contractor is already making the AirPods earbuds for Apple in Vietnam. Even Luxshare’s clients are worried about the problems with the power supply and China’s zero-covid policy. Luxshare said these clients were asking manufacturing partners to look outside China when they carry out key preliminary work for mass production, a stage known as new product introduction, or NPI.

Taiwan-based assemblers Foxconn Technology Group and Wistron Corp. are a step ahead and have already set up factories in India to produce the iPhones mainly for that country’s domestic market, where Apple sales are growing rapidly.

In April, Apple said that it has begun producing the latest generation of iPhones and the iPhone 13 series in India.

Such steps require considerable investment by suppliers, analysts and suppliers said, which makes them uneasy at a time when the global economic outlook is clouded by high commodity prices, the war in Ukraine and stock-market gyrations.
Cash is important in uncertain times, a contractor executive said, but suppliers need to go where Apple goes if they want to keep the business.