Apple will not be able to quickly solve manufacturing problems in China

China gives Apple more and more reasons to worry: the company’s manufacturing partners are forced to reduce capacity due to quarantine measures, and the local consumer is less and less interested in its products, preferring the budget segment. And getting rid of Chinese dependence quickly will not work.

Long-term sales growth in China has until recently been considered one of the most important achievements of Apple CEO Tim Cook. The plan to create a gigantic industrial base in the country was equally positively perceived – this helped to significantly reduce costs. Now, centralization of production appears to be an increasingly risky undertaking: in May, workers at the factory of one of the company’s suppliers in Shanghai staged real riots – the authorities kept them at the plant for too long in an attempt to curb another surge in the pandemic.

Negative trends are also noted in Apple itself: during the last financial report, the company warned that due to a shortage of chips and disruptions in production caused by quarantine restrictions, revenue for the current quarter could decrease by $ 8 billion from the planned figure. Recently, American consumers have also felt this: when ordering 14- and 16-inch versions of the MacBook Pro, they now have to wait up to 2 months, and the new generation MacBook Air, introduced last Monday, will not go on sale until July.

Apple has already begun to take steps to reduce its reliance on China, with CEO Tim Cook calling Apple’s supply chain “truly global” in a recent investor talk. This is true: a number of iPhones are indeed already being produced in India and Brazil, and part of the iPad and MacBook production has been moved to Vietnam. However, the scale of these enterprises is insignificant in comparison with the gigantic capacities of China.

The task of adapting supply chains will not be solved in a hurry: the same Foxconn took more than 30 years to reach its current scale of activity – this was also facilitated by the gradual expansion of the activities of its partners. Today, no country in the world will be able to find the resources to overnight recreate production capacity comparable in terms of performance to Foxconn enterprises that can attract up to several hundred thousand workers.

At the same time, China itself now has to make serious efforts to keep the country’s economy at the proper level: a decrease in consumer demand here already threatens to fall the entire global smartphone market by the end of this year. Apple is doing a little better than its competitors, but the market leader only hopes to keep iPhone production at the level of last year – there is no talk of growth.

The issue of production diversification is now being raised by other global brands seeking to reduce their dependence on China, so it is possible that the country will sooner or later lose the title of both the world’s largest contractor and the most voluminous, promising and growing market. However, changing priorities will prove to be a painful process for all players.

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