As winter has set in in the northern hemisphere and in China, the pandemic is picking up again, as Chinese authorities ease control measures. iPhone production could suffer greatly, and the Chinese even more.
For Apple, the pandemic is far from over! After a complicated end to the year, which saw the Chinese authorities ease their containment policy in certain regions, including Zhengzhou, in order to meet iPhone production needs, the situation could turn into a disaster.
According to production line experts, factories working for the American giant would be threatened by a new viral explosion in China. This threat could weigh on the production of iPhone, to the point of causing disturbances for several months. Which is quite logical, remember that 90% of iPhones manufactured are in China. We understand better why Apple is advancing at a forced march to exfiltrate the production of its smartphones out of the Middle Kingdom, and in particular towards India.
Delays that will increase?
Currently, on the French Apple Store, an iPhone 14 Pro Max ordered today should only be delivered between January 5 and 12 – yes, it’s too late for Christmas anyway. According to FinancialTimes, which reports the information, and USB, a Swiss bank which conducted market research, the situation is even more tense in the United States. The high-end iPhone 14s are already subject to a delay of around 23 days between their order and their delivery.
A catastrophic state of affairs for Apple, for whom the holiday season is always synonymous with sales records and the best fiscal quarter. The Cupertino giant is working hard with Foxconn to move production of its iPhones to other factories in other Chinese regions less susceptible to the virus. Apple has also ensured that the delivery times of components by its suppliers are reduced.
However, despite its adjustments, experts point to the many elements that could threaten the production of iPhones, but also other tech products made in China.
In addition to the usual Chinese New Year holidays, the start of the year period could be characterized by a high rate of absenteeism, and “not only in factories”explains an expert Supply Chain financial day-to-day, “but also in warehouses, distribution, logistics and transport”.
Two to six capital months
Last November, Apple had already avoided significant disruption for the holidays, with an estimated 8% drop in sales due to the lack of products. The machine cash what is the iPhone would indeed be halted because of these production problems. It would be between 5 and 15 million iPhones that would “miss” in the end.
Initially, market analysts believed that these sales would only be compensated, but some of them now believe that they may also not take place. This would be particularly the case in China, which is the third most important region for Apple, after the United States and Europe, and represents a fifth of its income. The Chinese could indeed review their priorities in the face of the outbreak of the pandemic.
“The next two to six months will be extremely important for Apple’s supply chain, due to China’s lack of maturity in dealing with Covid”explained to FinancialTimes Alan Day, a supply chain expert, who notably worked with the UN on corporate standards to respond to the spread of the coronavirus. “The rest of the world has developed standards”he continues, “but China has hardly incentivized companies to adopt these standards”. The price may be heavy to pay. But it is not asked Apple who will be the most to be pitied.
In fact, this management “immature” could have a frightening human cost. A figure put forward by some simulations indicates that a million Chinese are at risk of dying from Covid during the winter months since the containment measures were relaxed. The pandemic continues to wreak havoc in China, and winter is here.