Beijing’s ironclad Covid-19 policy is hurting not only the national economy, but also electronics makers like Apple that manufacture their products in the country. The beneficiaries of this diversification would be India and Vietnam, where Apple already has some production bases.
The US tech giant is now looking to expand the manufacturing scope in both counties, it has told its contractors, in an attempt to diversify, according to a Wall Street Journal report.
Any tangible move towards Apple, which is the largest US company by market capitalization, is likely to influence other Western multinationals to follow suit as companies seek to diversify their supply chains at the following Covid-19. Russia’s invasion of Ukraine can only hasten the process, the report adds.
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The report says Apple wanted to diversify away from China even before the pandemic, but Covid upended plans, but now the iPhone maker is telling contractors where to set up production facilities.
Continued travel restrictions in China have meant fewer Apple executives and engineers have been able to visit production sites over the past two years. In addition, frequent power outages last year have further tarnished the country’s image as a global manufacturing power.
India is the only country in Asia that offers Apple the same incentives as China to seriously increase production: a highly skilled workforce and low costs compared to the United States, furthermore acknowledged the report.
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The report further adds that Apple sees India as the closest alternative to China, as far as manufacturing plans are concerned, due to its large population and low costs.
Notably, Foxconn and Wistron have already set up production facilities in India, due to a large domestic market and its growing appetite for iPhones. The company is in talks with some suppliers to expand existing production in India, including for exports.
However, China-based Apple suppliers prefer Vietnam over India as they anticipate problems in India regarding the ease of doing business. Relations between New Delhi and Beijing soured after a deadly skirmish between troops from two countries left soldiers dead on both sides amid an ongoing border dispute. India has since stepped up its regulatory measures against Chinese companies in India.
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Of all iPhones made last year, 3.1% were made in India and that figure is expected to rise to 6%-75 this year, the report adds.
