Why Apple can’t leave China
For nearly two decades, Apple and China have been closely linked, including in the supply chain and product consumption market.
However, acc cnn, Cracks are appearing this year as China adopts a “no-Covid” strategy and closes many sites, and Apple’s partner factories like Foxconn, Pegatron… iPhones, iPads, and other Apple products are also slowing down. A country with billions of people.
In April, Apple CEO Tim Cook said supply chain disruptions in China would hurt business and cost up to $8 billion. In its third-quarter financial report, released June 28, the company’s revenue fell 1 percent to $14.6 billion. USD. Cook said the results were “still acceptable” despite the impact on demand following strict Covid-19 restrictions.
This isn’t the first time Apple has had a headache over its reliance on China. A year before the outbreak, the company warned of falling iPhone sales due to the escalating US-China trade war. Apple has taken a close look at the working conditions of workers at some of its manufacturing partners.
No matter how dire the situation, the US tech giant is unlikely to pull out of China any time soon, experts say.
“Apple cannot afford the risk of switching due to supply disruptions and better control over customer service,” said Lisa Anderson, CEO of LMA Consulting Group. “Repeating China’s scale will not be easy, so the transition will take a long time and require a lot of money.”
“The root” of the supply chain
Under his leadership, Cook has always had a close relationship with China. Having built and managed a global supply chain as Chief Operating Officer (COO) and later as CEO, he has always made China a priority. He also made several public visits to China to demonstrate his importance in the market.
But he started counting to reduce addiction. According to the message WSJ Earlier this year, the company is expanding production and setting up factories in Vietnam and India. Apple declined to comment. But Tim Cook stressed in April: “Our supply chain is truly global. So the products work everywhere.
But Apple works only “in stone” in other markets, and the main standards for the best products are still only made in China.
Apple is facing increasing pressure to diversify its product portfolio. “But it’s not easy because the low supply is the main reason they stay in China,” said IDC Vice President Brian Ma. Many suppliers might want to go elsewhere with Apple, but the logistics are a big challenge.
The market is hard to give up.
After the US, China is the second largest market for Apple products. According to Canalys, China accounts for nearly a quarter of Apple’s global sales, and the iPhone alone will account for a quarter of Apple’s sales by 2022. In the first half of the year it was 14 percent.
“Overall, China has been a big contributor to Apple’s growth,” said Gad Alon, a professor of management and technology at the University of Pennsylvania. “Apple has many, many reasons not to board the ship from China.
Apple recently enjoyed the second largest market in the world. It has reduced the price of the latest iPhone 13 models by 600 yuan ($89). “It’s rare for Apple to offer such promotions.” CNN Opinion.
The danger continues
Currently, Apple has been facing many problems in China lately due to the closure of the cities where its manufacturing plants are located. However, this is not the only problem. Even without the outbreak, the company could face similar problems in the future.
According to experts, past and future tensions between China and Taiwan could continue to hamper Apple’s manufacturing and business. Currently, many companies in Apple’s supply chain originate from Taiwan, such as Foxconn or TSMC.
“Any disruption in Taiwan’s supply chain would have a significant impact on Apple’s operations,” said Paul Trillo, senior vice president at Dentons Global, a strategic consulting firm.
Trillo believes Apple has no choice but to try and stay the course. Alon added that it’s impossible to find places that have the talent and capacity to deliver what Apple needs at this stage.
Bao Lam (Consequences CNN)