According to industry experts, Apple’s iPhone may experience severe production issues in 2023 due to the ongoing COVID-19 pandemic in China. The Chinese government recently relaxed its containment efforts in certain areas, including the city of Zhengzhou, where a significant portion of iPhones are manufactured. If a new outbreak of the virus were to occur, it could potentially impact production lines and cause delays in iPhone production. This is a particularly concerning prospect as around 90% of iPhones are produced in China.
COVID-19 Pandemic Threatens iPhone Production in 2023
To mitigate the risks, Apple is working with its manufacturing partner, Foxconn, to shift production to other parts of China that have been less affected by the virus. In addition, the company has also shortened the delivery periods for parts from its suppliers. However, supply chain specialists have warned that there may be high rates of absenteeism at the beginning of the year, not just in factories but also in warehouses, distribution, logistics, and transport.
Apple had already anticipated disruptions during the holiday season in November 2020, with an expected 8% decline in sales due to product shortages. These production issues could potentially lead to the temporary halt of iPhone production, resulting in a loss of 5 to 15 million iPhones. Some market analysts believe that these sales may not happen at all, rather than just being delayed, particularly in China, which accounts for around a fifth of Apple’s revenue and is the company’s third-most important market after the US and Europe.
The next few months will be crucial for Apple as the potential human cost of the COVID-19 pandemic in China could be catastrophic. While the rest of the world has implemented standards to combat the virus, China has yet to do so, according to Alan Day, a production chain specialist who has worked with the UN on corporate norms to combat COVID-19. Apple’s annual revenue has consistently grown in recent years, with the company achieving a market cap of $3 billion in 2022 and a revenue of $394.2 billion. However, production issues could potentially impact the company’s future success.
Apple has a long history of producing its products in China, but the ongoing pandemic has highlighted the need for the company to diversify its supply chain. In response, Apple has been working to move some of its production out of China, particularly to India. While the shift to alternative production locations may not be a quick or easy process, it could ultimately help to mitigate the risks associated with relying heavily on a single location for production.
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