Do not put all your eggs in one basket: Apple today chooses to follow this popular saying. The Californian firm wants to reduce the dependence of its production on China, according to information from the wall street journal.
Multiplication of difficulties in China
In the world, the only production of iPhone Pro was ensured at 85% by the factory of the Taiwanese group Foxconn located in the Chinese city of Zhengzhou, according to the firm of market research Counterpoint Research. A situation that has lasted too long according to Apple, which is seeing more glitches in the production chain of its flagship product. For several weeks now, the Cupertino company has been accelerating its plans to diversify contracts with its suppliers. And the tension that reigns in recent weeks in the Chinese factory encourages Apple to press the accelerator.
In recent days, several hundred employees have demonstrated to denounce their working conditions and the non-payment of their bonuses. The situation had quickly found a favorable outcome. But this event is only the latest in a long list. For several months, Foxconn has suffered the consequences of China’s zero Covid policy with strict confinements. The activity of the group’s factories is strongly impacted, with the direct consequence of a drop in iPhone production, which is moreover during a period of high demand (before the holidays).
In November, sources inside Foxconn estimated the drop in iPhone manufacturing at more than 30%. A shortage of nearly 6 million smartphones which considerably lengthens delivery times.
India and Vietnam?
“In the past, people didn’t pay attention to concentration risks […] Free trade was the norm and things were very predictable. Today we entered a new world“, analyzes lan Yeung, a former American executive of Foxconn quoted by our colleagues. Apple is thus summoned to develop its partnerships with new countries in order to limit the impact of potential crises on production. A welcome diversification in the eyes of many investors .
According to several sources involved in Apple’s business partnerships, the Cupertino company is eyeing India and Vietnam to ensure part of the manufacturing of its products. The two countries should welcome more factories, without ensuring a majority production. And for good reason, Vietnam would also be going through an employment crisis characterized by a significant lack of workers. The establishment of a site of a scale similar to that of Zhengzhou therefore seems implausible. In India, Apple is struggling with complex local laws that are not very favorable to foreign companies. Signs that presage a transition as vital as it is delicate.