Apple ‘Shifting Production Away From China’

Apple is reportedly accelerating plans to shift production outside of China, in response to disruption that has affected shipments of products such as its latest iPhones.

Separately, Apple supplier Goertek revised its annual revenue estimates sharply downward over the weekend after earlier saying Apple had asked it to suspend production of the AirPods Pro 2, which analysts said may be due to production issues.

In recent weeks Apple has told suppliers to plan more actively for assembling its products in countries including India and Vietnam, the Wall Street Journal reported.

Geographic concentration

The company is also looking to reduce its dependence on Taiwan’s Foxconn by shifting production to firms including Luxshare Precision Industry and Wingtech Technology, both based in mainland China.

The vast majority of Apple’s production has taken place in China for years, and any shift will be gradual due to the complexity of the process, the report said, citing industry analysts.

Unnamed sources said Apple was having trouble assigning staff to new suppliers elsewhere in Asia to carry out work known as new product introduction (NPI), which involves turning blueprints into a detailed manufacturing plan, due to a slowdown in hiring at the company.

TF International Securities analyst Ming-chi Kuo has said Apple’s long-term goal is to ship 40 to 45 percent of iPhones from India, up from a single-digit percentage currently, with Vietnam making AirPods, Apple Watches and MacBook laptops.

Disruption

Disruption at Foxconn’s biggest iPhone plant in Zhengzhou, which makes the majority of iPhones, has led to the longest wait times for high-end iPhones in the product’s 15-year history.

Meanwhile, mainland China-based audio components maker Goertek said on Saturday it had lowered its annual revenue estimates to as low as 1.7 billion yuan (£200m) from 4.7bn yuan earlier.

The reduction came after a “major overseas client” asked it to suspend production of a smart acoustic product, which analysts identified as Apple and its AirPods Pro 2.

Goertek initially disclosed the suspension in early November but at the time was still assessing the economic impact.

Production snarl

Analyst Kuo said at the time the production halt was “more likely due to production issues rather than demand issues”, adding to Apple’s supply-chain issues.

Kuo said Apple was shifting production of the AirPods Pro 2, introduced in September, to its primary AirPods supplier Luxshare.