While the health situation in China is alarming, Apple could experience significant production difficulties and, therefore, struggle to deliver its iPhones.
China struggles to control the virus
Until recently, the Chinese government enforced the zero Covid policy, confining anyone infected and taking strict prohibited measures to prevent the spread of the virus. If this way of doing things has had negative impacts on the production of many companies, and in particular Apple, Beijing’s decision to remove all these measures at once could turn out to be much worse.
Unlike many countries that have learned how to deal with the pandemic and the disease, China has always sought to eradicate it. Result : the herd immunity of its population is low and experts expect at least 1 million people to perish from Covid-19 in the country this winter. Since the lifting of the measures, the virus has spread exponentially, raising fears of a major increase in absenteeism at the country’s iPhone production plantsreport it FinancialTimes.
” We could see a lot of operations affected by absenteeism, not just in factories, but also in warehouses, distribution, logistics and transportation facilities. says Bindiya Vakil, managing director of Resilinc, a California-based group that tracks over 3 million components to provide supply chain mapping services.
Apple could suffer in 2023
Over 90% of iPhones are assembled in Chinathe situation should therefore automatically affect the production of phones from the apple brand, which is already experiencing delivery delays. During its last quarterly report, Apple did not wish to give hope for the holiday season as long as the climate was uncertain. In the month of November, she eventually warned of disruptions” important » as the end of the year festivities approach.
Now, analysts expect the Cupertino company’s revenue to fall below the $123.9 billion earned during the same period last year. That would end a streak of fourteen quarters of revenue growth. They further estimate that this trend could persist into 2023.in particular because demand in China is likely to decrease due to the pandemic. A fifth of the company’s revenues come from the Chinese market..
A solution, relocation?
Samsung, Apple’s biggest rival, left China in 2019 and produces its smartphones from four different countries. This is a strategy that Apple now wants to adopt in order to be less dependent on a single country. If Foxconn, its largest manufacturer, announced the investment of 500 million dollars to expand its manufacturing presence in India, Apple plans to transfer 25% of its production to India by 2025.