Experts warn of a months-long disruption risk to Apple's iPhone production, operations, and Chinese consumer demand caused by China's latest COVID-19 wave

Supply chain experts warn outbreak following reversal of zero-Covid curbs creates uncertainty for iPhone maker

Financial Times 2022-12-26 Patrick McGee

Context & Ripple Effects

Apple entered the latest wave after a weekslong outbreak at Foxconn’s Zhengzhou iPhone plant during a crucial ordering period. Related coverage also showed Chinese staff and suppliers taking on more complex iPhone 14 work even as Apple sought to reduce its reliance on China.

The new concern extends beyond a single factory disruption: worker absenteeism may affect iPhone production and Apple’s operations while weakening demand among Chinese consumers.

First-order effects

Apple faces a months-long risk to iPhone output and operating continuity as absenteeism spreads through its China-based workforce and supply chain.
Chinese consumer demand for iPhones is exposed at the same time, leaving Apple with both supply and local-sales uncertainty.

Second-order effects

Foxconn and Apple’s Chinese suppliers must manage labor availability during a critical production period, making delivery schedules more dependent on workforce disruptions than on planned capacity.
Apple’s effort to reduce China dependence gains urgency because the disruption affects the complex China-based work supporting iPhone 14, not only final assembly.

Third-order effects

Repeated COVID-related interruptions—from early-2020 iPhone production preparation delays to the Zhengzhou outbreak—underscore the concentration risk in a supply chain whose production and demand exposure are both tied to China.
If such disruptions persist, Apple’s supplier strategy is likely to place greater value on geographic redundancy, though the related coverage shows that shifting complex iPhone work away from China is not immediate.

The trend: Apple’s iPhone business is confronting a concentration-risk cycle in which disruptions to China can simultaneously constrain production, operations, and a major consumer market.

Discussion

@danharris Dan Harris on x
This threat to Apple's China manufacturing is a threat to every single company that manufactures in China. Does your company have a plan to deal with China's next 6-12 months? https://www.ft.com/...
@patrickmcgee_ Patrick McGee on x
“The next 2-6 months really will be a defining moment for Apple's supply chain, because of China's immaturity of handling Covid,” says ⁦@stateoffluxHQ⁩ 's Alan Day. @FT https://enterprise-sharing.ft.com/ ...
@dnystedt Dan Nystedt on x
Apple's business is under threat from the impact of a widespread Covid outbreak in China, FT reports, as the virus sickens workers across its supply chain, from assemblers and component manufacturers to warehouses, transport, more. $AAPL https://www.ft.com/...
@catherinemary0 @catherinemary0 on x
That's it. Now we'll get action on Covid. People can't buy an iPhone .... https://twitter.com/...
@aadilbrar Aadil Brar on x
“The consensus among analysts is that company revenues this quarter will fall just below the record $123.9bn it achieved over the same period last year, with net profits projected to tumble more than 8 per cent” https://giftarticle.ft.com/...
@finestyew @finestyew on x
“...estimated that upwards of 7-8 per cent of iPhones are being assembled in India, and predicted the big three Taiwanese suppliers were targeting 18 per cent of iPhone assembly to be in India by 2024.” https://www.ft.com/...
@levinepmc Norman Levine on x
Apple's share price already looked vulnerable. This won't help. https://giftarticle.ft.com/...

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