The Wall Street Journal has learned from sources that Apple is telling suppliers to ramp up their manufacturing transition out of China.
According to a report on November 3, people said Apple wants to move production to other Asian nations such as India and Vietnam. It is also considering other companies to assemble its products and reducing its reliance on Foxconn, which operates the largest iPhone plant in China’s Zhengzhou.
The move came after recent years of disruption caused by “zero-COVID” policies. The Journal noted that political tensions between the U.S. and the communist regime have not been able to budge Apple until now.
Wedbush Securities analyst Daniel Ives called China’s pandemic response “an absolute gut punch” to Apple. Ives stated, “This last month in China has been the straw that broke the camel’s back for Apple in China.”
TF International Securities analyst Ming-chi Kuo estimated that the number of iPhones shipped in the fourth quarter of this year would be between 70 million and 75 million, which is roughly 10 million fewer than predicted before the Zhengzhou upheaval.
Kuo believes the Chinese plant was operating at roughly 20% capacity in November. He expected this number to be 30% to 40% in December.
It remains unclear how long it would take for Apple to redirect production lines. The report noted that Apple still needs to keep factories humming as it rolls out new models and offers annually. The Zhengzhou plant puts out 80% of iPhone 14 and 85% of its Pro versions.
Ex-Foxconn executive Dan Panzica said no country yet had the right capacity to replace China in terms of making premium devices. Vietnam does not have as large a workforce as China, and Indian authorities are less cooperative.
Panzica believes that Apple can only build smaller villages to replace iPhone City.
Foxconn has also been spending generously to diversify its manufacturing footprint. According to the South China Morning Post, the firm has invested 1 billion yuan ($142 million) in its facilities in Taiyuan, the capital of Shanxi province. It has also poured $58.98 million of investment into a subsidiary in the Czech Republic. In August, it invested $300 million to erect a plant in Vietnam.