Today, many companies are fleeing from the Middle Kingdom: they are fed up with lockdowns and uncertainty in the policy of the authorities. But Apple #AAPL is in no hurry: it hopes that Foxconn factories can still cope with orders before the New Year holidays.
But they may not? Demand for the iPhone 14 Pro and Pro Max is high, but there are problems with production: covid lockdowns in China again. At best, shipments from there will be in early December. And at worst, it will be over before the New Year. All this threatens the company with huge losses.
So far the Foxconn factory is still holding out, but a social explosion is brewing there: workers are prohibited from contact with the outside world, where they work, they sleep. As a result, protests begin. Because of all this, the production of iPhones at the factory could fall by at least 30%.
So maybe we should run away from China? Apple is gradually reducing its presence in this country. For example, it began producing small batches of iPhones in India, and the production of iPads and Apple Watch went to Vietnamese factories. By the way, it is cheaper there: at the Foxconn factory in Vietnam, workers are paid less than half of what they are offered in China. And in any case it will be difficult for Apple to leave the Celestial Empire, because for 20 years the company has been building a network of suppliers in this country.
So what to do? If Apple stays in China, it will remain “hostage” to covid. It may be for a long time: even according to optimistic estimates, the restrictions will only be lifted in a year.
A gradual transfer of production to India, Vietnam, and Thailand is not a bad idea. But the process is not quick.
One way or another, it’s time for Apple to get ready for a big drop in profits, and for its advertisers to look for ways to retain customer loyalty.