February 8, 2023
The US company Apple has accelerated its plans to move part of its production lines outside of China, according to the Wall Street Journal, citing people familiar with the matter.

The people said the company has told its suppliers that they plan to collect more Apple products in other Asian countries such as India and Vietnam. According to the publication, the recent unrest in the Chinese city of Zhengzhou, known as the “City of the iPhone”, prompted Apple to take this step. At the giant plant in Zhengzhou, China, up to 300,000 workers work at Foxconn’s iPhone and other Apple products.

At one point, iPhone City alone produced about 85 percent of the iPhone Pro line, according to research firm Counterpoint Research. Violent protests took place at the Zhengzhou factory in late November.

Videos posted online show workers angry at wages and restrictions due to COVID-19 throwing objects and yelling “stand up for your rights”.

The video also shows that riot police were present at the scene, and the Wall Street Journal confirmed the events shown in the video of the workers at the scene.

After events that have eroded China’s position as a stable manufacturing hub, the disruption means Apple can no longer feel comfortable with so much of its business in one place, analysts and supply chain officials say.

China’s COVID-19 policy “has dealt a huge blow to Apple’s supply chain,” said Daniel Ives, an analyst at Wedbush Securities. “Last month was the straw that broke the camel’s back for Apple in China,” he added.

In the long term, Apple plans to ship 40 to 45 percent of iPhones to India, compared to the small percentage currently sold in the Asian country, said Mingchi Kuo, a supply chain analyst at TF International Securities. According to the newspaper, the American giant also plans to produce other products in Vietnam, such as AirPods, smart watches and laptops.

Kuo, a supply chain analyst, said that iPhone shipments in the fourth quarter of this year are likely to be around 70 or 75 million units, still about 10 million less than forecast before the Zhengzhou unrest. He said the top models of the iPhone 14 Pro and iPhone 14 Pro Max were particularly hard hit. He added that the plant was operating at about 20 percent of its capacity in November and that figure is expected to improve to 30 or 40 percent in December.

Apple and China have had a mutually beneficial relationship for decades, with the US company benefiting from a trained workforce and lower costs compared to the US. But the Wall Street Journal confirms that change won’t happen overnight. “Finding all the parts that will be produced at the scale required by Apple is not easy,” said Kate Whitehead, a former chief operating officer of Apple who now owns her own supply chain consulting firm.

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