The lockdown in Shanghai and nearby regions, and China’s strict zero-COVID policy, have forced Apple to move some iPad production out of the country and to Vietnam for the first time.
The company already expects to take an $8 billion revenue hit in the ongoing quarter due to supply chain disruptions caused by the Chinese lockdowns.
Apple wants its suppliers to stock up on key components
Nikkei Asia reports that Apple’s leading iPad assembler, BYD, will assemble the tablets at its production lines in Vietnam. The report also says Apple asked its suppliers to stock up on parts like printed circuit boards and other electronic components to avoid shortages and supply disruptions. This includes securing stocks for power-related chips required for the upcoming iPhone 14 series, whose production is already running behind by three weeks due to the lockdown.
In some cases, Apple also paid additional logistics costs to ensure key components arrive on time and production remains unhampered.
Apple wants its suppliers to stock up on at least two months of components for iPhones, iPads, MacBooks and AirPods. This could help ensure production continues at normal speed, and help prevent potential revenue losses like the one Apple could face this quarter. With the additional stock, the company hopes to offset any supply disruption from its vendors in Shanghai and nearby regions whose factories have been shut down due to the lockdown.
However, some supply chain executives think this move could be risky for vendors. Amid signs that consumer demand is slowing, the suppliers could be left with excessive stock if China ends the lockdowns.
Apple wanted to move some iPad production to Vietnam in 2021
The Cupertino giant seemingly wanted to manufacture iPads in Vietnam last year itself, but the increase in COVID-19 cases forced it to delay the plans. Apple already assembles AirPods in the country.
Apple has been looking to reduce its reliance on China for manufacturing its devices for a few years now. The company put the plans on hold due to the pandemic. However, with things slowly returning to normal, the company again urged its vendors to expand in Southeast Asian countries like India and Vietnam. It is also looking to make more iPhones and MacBooks outside China.