Apple has expedited plans to move a part of its supply chain outside of China. The company is asking suppliers to increase their assembly base in India and Vietnam.
Over the last year, China’s strict COVID-19 restrictions have disrupted Apple’s production lines in the country multiple times.
Apple wants to make more iPhones in India
Apple is also looking to reduce its dependency on Foxconn, its largest supplier. This will benefit its other supply chain partners, including Luxshare and Wistron.
In a Wall Street Journal report, TF International Securities analyst Ming-Chi Kuo says that in the long term, Apple wants to ship 40-45% of iPhones from India. Currently, this number is in single digits. The Cupertino company sees Vietnam as a manufacturing base for its other devices like AirPods and Apple Watch.
The analyst believes iPhone shipments for Q4 2022 will be around 70-75 million units. This is about 10 million lower than initially expected.
To expand production in India and Vietnam, Apple has to assign teams that work with supply chain partners to turn product blueprints and prototypes into final products. But a slowdown in hiring is preventing the company from allocating the required engineers for this task.
China’s strict COVID-19 policy has disrupted Apple’s supply chain
In early November, Apple warned of limited iPhone 14 Pro availability for the holiday season due to COVID-19 curbs in China’s Zhengzhou. The city is the home to the largest Foxconn-owned iPhone factory that went into total lockdown due to COVID outbreaks. This led Foxconn to run the factory in a “closed-loop system” to continue with production on a limited scale.
Eventually, an issue with wages and poor working conditions led to massive protests by the workers, which greatly affected production. The factory was estimated to run at 20% capacity in November, which is expected to improve to 30-40% in December.
Due to this, there’s a massive demand-supply imbalance for the iPhone 14 Pro series. This is also why even if you order the phone today, it won’t arrive in time for Christmas.