Apple, along with most tech companies that rely on China to manufacture their devices, had begun moving some of their manufacturing facilities to other countries as part of their China Plus One policy. Now Apple plans to diversify some of its supply chains and also move away from China.
While Apple had moved a significant portion of the iPhone 14 series to factories in India and other countries, those factories still relied on China to supply most of the major components. Apart from a few components that are made in Taiwan, most of the hardware is made an iPhone is still produced locally in China. Apple now wants to build different supply chain pathways and systems that would allow them to further reduce their dependence on China.
The Wall Street Journal reported this weekend that Apple recently “accelerated” its plans to expand manufacturing outside of China. Key iPhone assembly plants have been repeatedly disrupted by China’s tough COVID-19 policies, most notably in November with mass protests by workers.
Moving iPhone production out of China was a complicated process that will take more time. While moving the final assembly plants abroad was easy, moving the manufacturing facilities of the components that make up the iPhone will be much more difficult.
The manufacturing infrastructure and large, cheap labor that China offers are hard to find elsewhere although countries like India have stepped up and answered well. It’s even harder for Apple to recreate the supply chains its factories had in China and shift production of unfinished components to other countries.
Apple will gradually need to build similar supply chains in countries like India over time to meet the scaling needs of the iPhone. Ultimately, Apple is expected to shift up to 40% of iPhone production to other countries.
Earlier in November, Apple warned that closures at its main assembly plants in Zhengzhou, China, will have a significant impact on iPhone 14 Pro and iPhone 14 Pro Max availability this holiday season. Although Apple has slashed its production estimates by millions of units this year, it appears so will miss its delivery target for the iPhone 14 Pro by around 20 million units.
This has seriously hurt Apple’s sales projections as they will miss out on a number of potential customers who normally wait for the holiday season to buy the latest iPhones each year.
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