Apple has accelerated plans to shift some of its iPhone production outside China as it is telling suppliers to plan more actively for assembling the company’s products elsewhere in Asia, particularly India and Vietnam.
This comes after a series of protests by thousands of workers at Foxconn’s plant in China’s Zhengzhou amid strict Covid-19 curbs, according to a report in Wall Street Journal.
The Zhengzhou plant, run by Foxconn to make iPhones and other Apple products, houses nearly 300,000 workers. It produces the majority of its premium models including the iPhone 14 Pro.
At one point, the plant alone made about 85% of the Pro lineup of iPhones, according to market-research firm Counterpoint Research.
The protests have reportedly affected the production of iPhone 14 Pro and other models and also dented China’s reputation as a stable manufacturing center.
Apple has told its manufacturing partners that it wants them to start trying to do more of this work outside of China, Wall Street Journal report said.
Longer Wait Time For New iPhones
China’s zero Covid policy has become a concern for Apple and many other companies. Besides, tensions between US and China are another reason Apple and other US companies are looking to diversify the manufacturing of their products.
That said, wait times for high-end iPhones are already increasing, especially ahead of the holiday season.
Apple issued a warning in November that shipments of the Pro models would be hurt by Covid-19 restrictions at the Zhengzhou facility.
Apple issued a statement after more protests grew at the Foxconn factory. “We are reviewing the situation and working closely with Foxconn to ensure their employees’ concerns are addressed,” a spokesman said.
Taiwan-based Foxconn and Pegatron became an essential link between Apple and the Chinese assembly plants.
Many have escaped, jumping fences and walking along empty highways to get back to their hometowns. In November, the pandemic policies and pay disputes further fueled workers’ grievances. Some clashed with police at the site and left smashed glass doors.
Meanwhile, Foxconn is offering money to get workers to come back and stay for a while. One of its offers is a bonus of up to $1,800 for January to full-time workers in Zhengzhou who joined at the start of November or earlier. Those who wanted to quit have gotten $1,400.
A Big Opportunity For India?
Apple was reportedly looking to diversify iPhone manufacturing and shift some of the production away from China and India is a likely choice.
Apple’s longer-term goal is to ship 40% to 45% of iPhones from India, compared with a single-digit percentage currently, the report quoted analyst Ming-chi Kuo as saying.
Apple is likely to move a quarter of iPhone production to India, the world's second-biggest smartphone market, by 2025, a JP Morgan report said last month.
Analysts estimate that Apple will turn India into a global iPhone manufacturing hub by 2025 as it slowly cuts its reliance on China.
It is also estimating about 25% of all Apple products, including Mac, iPad, Apple Watch and AirPods, to be manufactured outside China by 2025 from 5% currently.
Foxconn already assembles Apple devices in its Chennai plant and Apple has widened its production capability through Foxconn and Wistron.
According to a report from Counterpoint Research, locally manufactured iPhones in India grew 196 per cent YoY in 2021. Further, only 23 per cent of iPhone shipments in India last year were imported, a significant reduction from the 64 percent imports in 2019.
Apple had worked with suppliers to ramp up manufacturing in India after the company launched its latest iPhone series two months ago.
Meanwhile, Tata Group is in discussions with Taipei's Wistron Corp, one of Apple’s top vendors in India, to buy its manufacturing facility in Karnataka for Rs 5,000 crore.
Wistron began making iPhones in India in 2017, after years of efforts by Apple to add manufacturing capabilities in the country.
If successful, the pact could make Tata the first Indian company to build iPhones, which are currently mainly assembled by Taiwanese manufacturing giants like Wistron and Foxconn Technology Group in China and India.
Foxconn Sees China Plant Back At Full Output
Foxconn expects the Zhengzhou plant to resume full production around late December to early January, days after production was affected amid workers' protests, according to a Reuters report.
Foxconn could have seen more than 30% of the Zhengzhou site's November production affected, Reuters reported last month.
The report said the company and the local government are working on the recruitment drive but many uncertainties remain. "The situation has stabilised," the report cited a person close to the matter as saying.
