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Report: Apple looks to India and Vietnam to expand production

Quartz logo Quartz 5/22/2022 Lila MacLellan
A man wears a face mask while waiting at an Apple Store before Apple's 5G new iPhone 12 go on sale in Shanghai © Provided by Quartz A man wears a face mask while waiting at an Apple Store before Apple's 5G new iPhone 12 go on sale in Shanghai

Apple is looking to bump up production outside China, the Wall Street Journal reports, echoing similar pre-pandemic headlines.

This time the tech giant is apparently urging its manufacturing partners to consider shifting some production outside of China because of frustrations with the country’s strict covid-19 protocols, which have led to lengthy lockdowns of hundreds of millions of people and travel restrictions.

Apple has long relied on China for the vast majority—more than 90%, writes the Journal— of its manufacturing. A small percentage of its products are produced in India and Vietnam. Now the Journal’s sources, identified only as people familiar with the talks, say that both countries have been named as potential destinations for added manufacturing.

Apple’s inching away from China could be just the beginning

If the report is accurate, Apple’s rebalancing away from China could lead other tech companies to follow suit.


Video: Investors should buy Apple because its problems are supply, not demand, says Evercore's Daryanani (CNBC)

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China is already seeing a sustained decline in foreign investment with outflows reaching $17.5 billion in March alone, according to recent data from the Institute of International Finance (IIF), a US-based trade association. It has called the shift “unprecedented.” It’s also unique: Other emerging markets have not seen the same investor reaction during the pandemic, the association said.

China’s refusal to condemn Russia’s invasion of Ukraine and its ongoing war there is another reason investors and US companies are backing away from the country. Political analysts have furthermore feared that China will feel embolden by Putin’s war in Ukraine to act on plans for an attack on Taiwan.

Meanwhile, the country’s unrivaled zeal in pursuing a “covid zero” strategy, not to mention energy crunches that led to outages in 2021, have also sparked concerns about its domestic economy. Besides Apple, major firms like Starbucks, Dupont, and Estée Lauder have all blamed lengthy covid lockdowns for operational hurdles and slower sales, writes CNBC. Before the pandemic, Apple was also motivated to move some of its production outside China because of its exposure to geopolitical risks.

Quartz has reached out to Apple for comment on the Journal’s report.

Don’t expect a drastic or sudden change

Despite the snowballing list of reasons that China may look less attractive to US companies, some analysts say not to expect drastic or swift change.

Apple has spent decades building its assembly hubs and relationships in China, where it has access to a massive pool of skilled talent and solid infrastructure, the Journal also underlines. Plus, as with other US-based firms, making products in China gives Apple easier access to China’s enormous domestic consumer market.

“Supply chain diversification is quite tricky because people always talk about it, and boardrooms love to discuss it,” Nick Marro, global trade leader at The Economist Intelligence Unit, recently told CNBC, “but often at the end of the day people find it’s difficult to implement.”

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