Coronavirus troubles underscore Apple's reliance on China

Posted:
in iPhone edited March 2020
The COVID-19 outbreak has made it clear just how dependent Apple is on its supply chain in China, despite efforts to diversify where its products are made.

iPhone 11 Pro
Apple is reportedly unlikely to shift flagship iPhone production outside of China despite COVID-19 concerns.


Last Friday, Apple CEO Tim Cook said that the company remains "fundamentally strong" in the face of the coronavirus threat. And while it's unclear whether COVID-19 is going to have any sort of long-term impact on Apple, the crisis does underscore the company's reliance on Chinese factories and workers.

Apple currently makes the majority of its products in mainland China, owing to the strong pool of highly skilled labor and advanced infrastructure in the country. Laden with demand for popular products like iPhone, Apple itself has over the past two decades helped build out the production facility latticework that is Chinese industry. The tech giant trained a bevy of new suppliers and supplied oxygen to handful of manufacturing giants including Foxconn and Pegatron.

In an interview last week with Fox Business Network, Cook reiterated some of the reasons why China's supply chain is important to the company, including quality, time to market and depth of engineering. Cost is also a factor, but Cook noted that labor hasn't been "cheap" in China for years.

Plans to look beyond China for large-scale manufacturing have been floated at Apple for years. The Wall Street Journal reports that Apple's reliance on the country "long frustrated" staff, and the company mulled relocating some production lines to Vietnam "as early as 2015." Those efforts were nixed by higher-level executives who said the shift would be "too challenging to undertake."

While Apple has been slowly diversifying its supply chain, it hasn't yet found an alternative to China. For example, the company manufactures some iPhone models in India and, at one point, had plans to produce iPhone 11 models there. According to a Foxconn source, however, India currently lacks the skilled labor and infrastructure necessary to produce OLED-equipped iPhones and as a result Apple halted plans to produce flagship handsets in the region.

That's likely to remain the case for the foreseeable future. This year, production of Apple's flagship smartphones is "unlikely" to be shifted to India even in the face of the outbreak, the Foxconn source said. The WSJ report indicates that new flagship models are likely to remain a China-exclusive production, at least through 2020.

When it comes to labor and infrastructure, China is hard to compete with. Even the U.S. has had trouble matching what's available in the country. Apple's new American-made Mac Pros are only being shipped to North and South America, while models meant for other markets are produced in China.

Apple's dependence on China and the recent coronavirus outbreak has forced the company to update its revenue guidance for the second fiscal quarter of the year, even as the Cupertino firm searches for alternative component sources.

Cook noted last Friday that China was "getting the coronavirus under control," however. Its supply partners in the area are also working to mitigate the effects, including paying factory workers extra to return to work.

Comments

  • Reply 1 of 17
    The whole planet is dependent on China due to their capabilities. Unless you are only making textile then southeast Asian will work. How vulnerable we are when things like this happens.
    GeorgeBMac
  • Reply 2 of 17
    tyler82tyler82 Posts: 969member
    Can't wait until April when it will all be over.
  • Reply 3 of 17
    M68000M68000 Posts: 367member
    tyler82 said:
    Can't wait until April when it will all be over.
    Hope you are right
  • Reply 4 of 17
    KuyangkohKuyangkoh Posts: 730member
    The government are also very supportive of the companies in China....in the US lawmakers are hindrance, too many laws so companies looks around for the best bottom line. 
  • Reply 5 of 17
    tzeshantzeshan Posts: 2,351member
    So? We are all dependent on each other globally. An 8th degree earthquake in Taiwan will halt Apple product production too. 
    Anilu_777GeorgeBMac
  • Reply 6 of 17
    ivanhivanh Posts: 590member
    Simply take a look at where Samsung is making its smartphones and read the article again.
  • Reply 7 of 17
    Anilu_777Anilu_777 Posts: 268member
    tyler82 said:
    Can't wait until April when it will all be over.
    Hahahahaha!
  • Reply 8 of 17
    tedz98tedz98 Posts: 70member
    I have a hard time believing India can’t supply enough talented labor to produce Apple products. Up until now the biggest reason Apple likes to produce products in China is cost, ie cheap labor. Don’t let Tim Cook fool you when he says labor hasn’t been cheap in China for a long time. After the Coronavirus incident, Wall Street will be pressuring Apple to diversify its supply chain and manufacturing. The same will happen to pharmaceutical companies that rely on China for drug manufacturing.
  • Reply 9 of 17

    EDIT: Never Mind.

    edited March 2020
  • Reply 10 of 17
    GeorgeBMacGeorgeBMac Posts: 10,281member
    M68000 said:
    tyler82 said:
    Can't wait until April when it will all be over.
    Hope you are right

    Not a chance....   By April it will be in full bloom.   China is already starting to block flights into their country to stop importing the virus from world hot spots like Italy, Korea, etc...
  • Reply 11 of 17
    GeorgeBMacGeorgeBMac Posts: 10,281member
    tedz98 said:
    I have a hard time believing India can’t supply enough talented labor to produce Apple products. Up until now the biggest reason Apple likes to produce products in China is cost, ie cheap labor. Don’t let Tim Cook fool you when he says labor hasn’t been cheap in China for a long time. After the Coronavirus incident, Wall Street will be pressuring Apple to diversify its supply chain and manufacturing. The same will happen to pharmaceutical companies that rely on China for drug manufacturing.

    That's just popular propaganda.   Did you even read the article?   In it, Cook said:
    "Cook reiterated some of the reasons why China's supply chain is important to the company, including quality, time to market and depth of engineering. Cost is also a factor, but Cook noted that labor hasn't been "cheap" in China for years."

    Apple and others have been saying the same for years.

    Just as Apple users go to Apple for multiple reasons and multiple layers of reasons Apple goes to China for the same kind of reasons and layers of reasons:   When looked at as a whole, they just do it better.   That is:  it doesn't matter how cheap something is if returns and repairs eat up any cost savings.  Likewise it doesn't matter how cheap something is if you can't get it out the door or if its lower quality turns buyers away.
    muthuk_vanalingam
  • Reply 12 of 17
    Above_The_GodsAbove_The_Gods Posts: 25unconfirmed, member
    tedz98 said:
    I have a hard time believing India can’t supply enough talented labor to produce Apple products. Up until now the biggest reason Apple likes to produce products in China is cost, ie cheap labor. Don’t let Tim Cook fool you when he says labor hasn’t been cheap in China for a long time. After the Coronavirus incident, Wall Street will be pressuring Apple to diversify its supply chain and manufacturing. The same will happen to pharmaceutical companies that rely on China for drug manufacturing.
    Apple has to rely on China in the long run anyway because American labor won't be as good in the future in comparison to other top countries. For example, in California, low IQ Central Americans are the largest demographic group who, by no means whatsoever, will deliver anything close to what you can get even in central Chinese Provinces.
    edited March 2020
  • Reply 13 of 17
    tzeshantzeshan Posts: 2,351member
    tedz98 said:
    I have a hard time believing India can’t supply enough talented labor to produce Apple products. Up until now the biggest reason Apple likes to produce products in China is cost, ie cheap labor. Don’t let Tim Cook fool you when he says labor hasn’t been cheap in China for a long time. After the Coronavirus incident, Wall Street will be pressuring Apple to diversify its supply chain and manufacturing. The same will happen to pharmaceutical companies that rely on China for drug manufacturing.

    That's just popular propaganda.   Did you even read the article?   In it, Cook said:
    "Cook reiterated some of the reasons why China's supply chain is important to the company, including quality, time to market and depth of engineering. Cost is also a factor, but Cook noted that labor hasn't been "cheap" in China for years."

    Apple and others have been saying the same for years.

    Just as Apple users go to Apple for multiple reasons and multiple layers of reasons Apple goes to China for the same kind of reasons and layers of reasons:   When looked at as a whole, they just do it better.   That is:  it doesn't matter how cheap something is if returns and repairs eat up any cost savings.  Likewise it doesn't matter how cheap something is if you can't get it out the door or if its lower quality turns buyers away.
    If Apple did not make iPhones in China then Apple won't be as big as today. Under democracy, people do not express appreciation. They are used to blame others but never themselves through freedom of speech and expression. But this is human nature according to the story of Adam and Eve. 
  • Reply 14 of 17
    GeorgeBMacGeorgeBMac Posts: 10,281member
    tzeshan said:
    tedz98 said:
    I have a hard time believing India can’t supply enough talented labor to produce Apple products. Up until now the biggest reason Apple likes to produce products in China is cost, ie cheap labor. Don’t let Tim Cook fool you when he says labor hasn’t been cheap in China for a long time. After the Coronavirus incident, Wall Street will be pressuring Apple to diversify its supply chain and manufacturing. The same will happen to pharmaceutical companies that rely on China for drug manufacturing.

    That's just popular propaganda.   Did you even read the article?   In it, Cook said:
    "Cook reiterated some of the reasons why China's supply chain is important to the company, including quality, time to market and depth of engineering. Cost is also a factor, but Cook noted that labor hasn't been "cheap" in China for years."

    Apple and others have been saying the same for years.

    Just as Apple users go to Apple for multiple reasons and multiple layers of reasons Apple goes to China for the same kind of reasons and layers of reasons:   When looked at as a whole, they just do it better.   That is:  it doesn't matter how cheap something is if returns and repairs eat up any cost savings.  Likewise it doesn't matter how cheap something is if you can't get it out the door or if its lower quality turns buyers away.
    If Apple did not make iPhones in China then Apple won't be as big as today. Under democracy, people do not express appreciation. They are used to blame others but never themselves through freedom of speech and expression. But this is human nature according to the story of Adam and Eve. 

    That's how it is today.   Just a few decades ago people took responsibility.   That was the democracy that I grew up in. 
  • Reply 15 of 17
    tmaytmay Posts: 5,430member
    tedz98 said:
    I have a hard time believing India can’t supply enough talented labor to produce Apple products. Up until now the biggest reason Apple likes to produce products in China is cost, ie cheap labor. Don’t let Tim Cook fool you when he says labor hasn’t been cheap in China for a long time. After the Coronavirus incident, Wall Street will be pressuring Apple to diversify its supply chain and manufacturing. The same will happen to pharmaceutical companies that rely on China for drug manufacturing.
    Apple has to rely on China in the long run anyway because American labor won't be as good in the future in comparison to other top countries. For example, in California, low IQ Central Americans are the largest demographic group who, by no means whatsoever, will deliver anything close to what you can get even in central Chinese Provinces.
    Moderators, now would be a good time to pull the plug on this poster. That's absolutely hate speech, and as well, completely false.
  • Reply 16 of 17
    tmaytmay Posts: 5,430member

    tzeshan said:
    tedz98 said:
    I have a hard time believing India can’t supply enough talented labor to produce Apple products. Up until now the biggest reason Apple likes to produce products in China is cost, ie cheap labor. Don’t let Tim Cook fool you when he says labor hasn’t been cheap in China for a long time. After the Coronavirus incident, Wall Street will be pressuring Apple to diversify its supply chain and manufacturing. The same will happen to pharmaceutical companies that rely on China for drug manufacturing.

    That's just popular propaganda.   Did you even read the article?   In it, Cook said:
    "Cook reiterated some of the reasons why China's supply chain is important to the company, including quality, time to market and depth of engineering. Cost is also a factor, but Cook noted that labor hasn't been "cheap" in China for years."

    Apple and others have been saying the same for years.

    Just as Apple users go to Apple for multiple reasons and multiple layers of reasons Apple goes to China for the same kind of reasons and layers of reasons:   When looked at as a whole, they just do it better.   That is:  it doesn't matter how cheap something is if returns and repairs eat up any cost savings.  Likewise it doesn't matter how cheap something is if you can't get it out the door or if its lower quality turns buyers away.
    If Apple did not make iPhones in China then Apple won't be as big as today. Under democracy, people do not express appreciation. They are used to blame others but never themselves through freedom of speech and expression. But this is human nature according to the story of Adam and Eve. 
    I don't have a clue what the message is that you are attempting to communicate, but for the record, Apple will have to diversify if it ends up true that they have forced labor in their productions system.

    https://www.bbc.com/news/world-asia-china-51697800

    "Thousands of Muslims from China's Uighur minority group are working under coercive conditions at factories that supply some of the world's biggest brands, a new report says.

    The Australian Strategic Policy Institute said this was the next phase in China's re-education of Uighurs.

    China has already detained about a million Uighurs at internment camps, punishing and indoctrinating them. 

    Officials say the camps are aimed at countering extremism.

    The ASPI report comes after a senior Chinese official told reporters in December that members of the minority group being held in the camps had now "graduated".

    What does the report say?

    Between 2017 and 2019, the ASPI think tank estimates that more than 80,000 Uighurs were transferred out of the far western Xinjiang autonomous region to work in factories across China. It said some were sent directly from detention camps.

    ASPI said the Uighurs were moved through labour transfer schemes operating under a central government policy known as Xinjiang Aid.

    According to the report, the factories claim to be part of the supply chain for 83 well-known global brands, including Nike, Apple and Dell."


    This is an epic fuckup by the CCP.

  • Reply 17 of 17
    I think this headline would be more accurate if it read

    “Coronavirus troubles underscore world’s reliance on China”

    tmaymuthuk_vanalingam
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