The coronavirus pandemic has greatly influenced the whole world, and there’s hardly any industry that wasn’t affected. Although it’s not obvious, it also applies to Apple. It’s not a secret that most of the company’s production is concentrated in China. And while the whole world gradually removes quarantine restrictions and gets used to the post-pandemic life, China is still full of restrictions.
Coronavirus Is Still on the Rise in China
It seems that all people got used to constant social distancing rules and the quarantine conditions. People It has already become a habit for people to order everything online and find entertainment on the Internet, such as playing online casino or other games and avoiding face-to-face meetings. However, all this is gradually becoming a thing of the past.
People take off their masks, companies resume their production. At the same time, China often tightens quarantine restrictions due to frequent outbreaks of Covid-19, which is one of the factors negatively affecting Apple production in the country.
At the moment, over 90% of iPhones, iPads, and Mac computers are concentrated in China. Due to the zero-Covid policy, the Chinese plants still face the need to suspend production due to disease outbreaks. Of course, this negatively influences the company’s profits. According to the experts’ forecasts, Apple will lose around $8 billion by the end of the year.
The pandemics consequences are only one of the reasons why Apple is trying to diversify and optimize the production of its high-tech devices. But it’s worth noting that the company was considering reducing dependence on China even before, but Covid-19 has complicated and delayed those plans. So, which other factors influence such a decision?
Labor in China is No Longer Cheap
Of course, every company wants to cut the expenses, which include salaries for workers. And until now, China was a perfect market, but the labour is not as cheap as before. It’s still not as expensive in the USA, but Apple is searching for more options to provide its devices and reduce costs. Nowadays, a part of production is located in India and Vietnam since it’s more profitable for the company. Apple is gradually trying to increase volumes in these countries, but the process is quite laborious and slow.
Geopolitical Issues Among the USA and China
China doesn’t have a strict position concerning Russia invading Ukraine. While Apple has stopped deliveries to Russia against the backdrop of these events, China is still attempting to maintain neutrality. Of course, this aggravated relations between the countries. Many American companies have expressed their intention to leave the Chinese market, which may be another point in favour of relocating Apple’s production.
Establishment of Apple Production in India
Nowadays, Apple production has been partially established in India. In the first quarter of 2022, a million iPhones were released there, which, however, cannot be compared with the volumes of China.
Since smartphones are the most profitable products in the enterprise assortment, it’s critical for Apple to arrange its manufacturing in order to satisfy the demand. Therefore, it cannot yet be said that the optimization was successful. The process is complicated by rather poor working conditions in factories, which often results in production delays due to worker riots.
Further Development Plans of the Company
In the long run, Apple is trying to reduce its dependence on China by shifting production to other countries. In addition to India, the company is already active in Vietnam and Indonesia. However, the percentage of the products made there is really low as compared to China. They also see Brazil as a potential country to build their devices.
The selection of countries for production is determined by the large population of these countries and the need for more jobs. Moreover, they have a low cost of manufacturing equipment, allowing Apple to reduce its expenses. However, getting rid of dependence on China is not so easy, and it can take quite a long time. The company is gradually implementing its plans, but, of course, cannot yet completely abandon Chinese production.