Supply chain disruptions may drive Apple out of China

apple factory in China

Reportedly, California-based tech giant Apple may exit China in light of the long-withstanding COVID-19-related restrictions and lockdowns, as they’ve been disrupting supply chains since a very long time. Instead, it will focus on production hubs based out of India and Vietnam, and will source chips from Arizona, thereby advocating on behalf of nearshoring and reshoring.

The most conservative analysts have estimated that if Apple moves aggressively, it could get 20% of its supply chain out of China in 8 years. The more bullish ones say it will take at least 3 years to move half. The development will lead to making Apple products more affordable if most of the production comes to India.

However, experts also say that most other consumer goods manufacturers may not immediately and widely follow Apple’s footsteps tracing outside China, even though Apple is a reliable trendsetter with supply chain bona fides. It has been observed that there has been a mass upheaval about supply chains being crippled due to restrictions, lockdowns and protests in China, and industry leaders are re-thinking supply chains. But not much action has been taken in the direction of quantifying these theories.

Even though US’ imports from China are shrinking gradually, a study by Gartner done back in mid-2022 revealed that 95% of responding companies were reevaluating their China sourcing strategies. More than half had taken action. But the most common strategy to emerge from those considerations is a ‘China plus one’ strategy, i.e. sourcing from China, with a backup source in another country.

By popular opinion, the West’s heavy reliance on China is due to its lineage of manufacturing expertise. Add onto it the availability of an entire production ecosystem – men, machines as well as raw materials -and you have the perfect concoction for a glittery cost-effective supply chain package.

Also read – Inside ‘iPhone City,’ the massive Chinese factory town where half of the world’s iPhones are produced

Leave a Reply

Your email address will not be published. Required fields are marked *