China’s zero Covid policy forces Apple to look for a backup supplier in India

China’s zero Covid policy forces Apple to look for a backup supplier in India
China's zero Covid policy forces Apple to look for a backup supplier in India
  • Apple Inc.’s Taiwanese contract manufacturer Pegatron Corp. has started assembling the company’s latest iPhone 14 model in India.
  • The move is caused by the abrupt Covid-19 lockdown at the key iPhone Pro manufacturing hub in the Chinese city of Zhengzhou, operated by Foxconn Technology Group.

It wasn’t long after the launch of the iPhone 14 lineup that Apple Inc began manufacturing it in India, through its main assembler Foxconn Technology Group. Although the vast majority of iPhones were still made in China, the move was seen as part of Apple’s gradual diversification from China as it seeks to reduce the risk of supply chain disruptions stemming from the country’s strict zero-Covid policy. and the tensions with the US.

Unfortunately, the situation in China is not improving as the country recently announced a seven-day closure of the area around Foxconn’s main plant in Zhengzhou. The move, as anticipated, will severely curtail shipments in and out of the world’s largest iPhone factory. Since then, the scenario has highlighted Apple’s deep dependence on China, thus highlighting the importance of your diversification plans underwaylike India and expansion of vietnam.

For now, there have been reports that Apple has chosen another Taiwanese contract manufacturer, Pegatron Corp., as its second supplier in India. In a report of BloombergPegatron has apparently began to assemble the company’s latest iPhone 14 model at its factory in the southern Indian state of Tamil Nadu. The factor, with 7,000 employees at the end of September, also started making iPhone 12 phones earlier this year.

Pegatron usually gets orders for entry-level models from Apple. In general, with Prime Minister Narendra Modi’s financial incentive program, all of Apple’s biggest Taiwanese suppliers (Foxconn, Pegatron and Wistron Corp.) have accelerated iPhone assembly in India. That, in turn, helped boost iPhone exports from the South Asian country.

However, Counterpoint Senior Analyst Ivan Lam said the one big hurdle to more production moving out of China is that most iPhone components are still made there and need to be shipped wherever they’re assembled. the devices. Overall, experts generally suggest that Beijing’s Covid Zero approach is likely to further disrupt Foxconn’s main operating base, which produces about four out of five of Apple’s latest phones.

As it is, Foxconn, whose main listed arm is Hon Hai Precision Industry Co., was already grappling with a Covid-19 outbreak that forced some of its 200,000 employees into quarantine and pushed others to flee offices. facilities, some on foot.

Even with India, Apple expects slower production

just last week, Tech Wire Asia reported about the possibility of a Christmas slowdown for Apple. Not long after, the Cupertino, California-based company reaffirmed in a statement on Sunday that “customers will experience longer wait times to receive their new products.” This despite the company continuing to see strong demand for the iPhone 14 Pro and iPhone 14 Pro Max models.

At the moment, iPhone 14 Pro phone deliveries are listed for late November or early December, according to Apple’s website. Apple said the facility is operating at “significantly reduced capacity,” while Foxconn said in a separate statement that it is lowering its outlook for the fourth quarter to account for the lockdown.

“Foxconn is now working with the government in a concerted effort to end the pandemic and resume production at full capacity as quickly as possible,” the Taiwanese company said in a statement. Overall, despite doing better than other smartphone makers, Apple backtracked on plans to ramp up production of its new iPhones this year after an anticipated surge in demand failed to materialize. Bloomberg has reported.

Although Apple has reported better-than-expected results, it still warned of a Christmas slowdown.

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