Mark Gurman observes that it was Tim Cook dinner who was accountable for the choice to make use of China as an meeting hub, again within the days when he was the corporate’s chief operations officer …
Apple is in a really totally different place immediately than was Google in 2010. Whereas Google had large ambitions throughout the nation, it was not dependent in the marketplace. Apple very a lot is. Not simply because China is the most important smartphone market on this planet – and as necessary to Apple as the entire of Europe – however as a result of it’s the iPhone maker’s key manufacturing base. With out China, it actually couldn’t make its merchandise.
Apple is engaged on this, with new manufacturing vegetation in India, Vietnam, Indonesia and elsewhere. However my view is that it in all probability must speed up these efforts such that it may, if essential, abandon China as a producing base altogether.
And once more simply final month:
One nightmare situation may simply result in one other. China may very well be emboldened by what it’s seeing in Ukraine, and resolve that it’s lastly time to grab management of Taiwan.
Putin simply demonstrated that the West can not take any form of army motion to defend the Ukraine; the specter of all-out nuclear warfare is simply too terrifying. All our army forces can do is sit again and watch, and hope the financial sanctions will finally show efficient. The identical can be true of Taiwan […]
A lot of the world would once more impose monetary sanctions on China, although the worldwide financial influence can be excessive. However may Apple afford to take a principled stand there? It might not solely be sacrificing a large proportion of its gross sales throughout the nation itself, however it could even be totally unable to fulfill product demand for the remainder of the world if it ceased Chinese language manufacturing.
We’ve all the time acknowledged that Apple couldn’t act in a single day, and the corporate has made progress through the years in diversifying its manufacturing and meeting processes, however the tempo of this has been glacial. It’s now been 5 years since even outdoors commentators may see the writing on the wall, and the Cupertino firm nonetheless appears reluctant to take decisive motion.
‘Bloomberg’ on Apple’s dependence on China
Apple Inc. likes to say that its provide chain is world and that it isn’t overly depending on China. The fact is that Apple is tremendously reliant on the nation for manufacturing, and this relationship has precipitated complications for the corporate, buyers and customers throughout the pandemic.
That was particularly evident on the corporate’s second-quarter convention name final week, when Apple warned that provide shortages—spurred largely by Covid-19 lockdowns in China—would scale back gross sales by as a lot as $8 billion. That’s like dropping a complete quarter’s price of iPad gross sales.
Gurman notes that Cook dinner was the architect of this China-based meeting mannequin.
The true bottleneck in manufacturing is the meeting course of, higher identified inside Apple and the manufacturing subject as FATP. That stands for closing meeting, take a look at and pack. The overwhelming majority of Apple units undergo that course of in China. That’s why your MacBook Professional, iPad or iPhone in all probability says, “Assembled in China.”
It’s a mannequin that Cook dinner pioneered himself, centralizing meeting within the nation as elements get shipped in from world wide.
Whereas COVID-19-related disruption could be a short lived downside, Gurman runs by a complete sequence of China-related points the corporate has skilled through the years, and means that the corporate ought to spend a few of its huge money surplus on investing in a a lot sooner manufacturing diversification program.
Maybe these billions can be higher spent on creating a brand new, rather more world closing meeting chain—and even a stronger push towards automated manufacturing.
FTC: We use revenue incomes auto affiliate hyperlinks. Extra.