Apple Inc planning to ramp up production in India over China: Report

India and Vietnam, which are already sites of Apple production, are among the countries being seen
as an alternative option to China.

Battered by Beijing's strict anti-Covid measures, Apple Inc has told some of its contract
manufacturers that it wants to increase the production outside China, the Wall Street Journal
reported, citing people familiar with the matter.

India and Vietnam, which are already sites of Apple production, are among the countries being seen
as an alternative option to China, the report added.

This move by Apple, being the largest US company by market capitalization, will influence the
thinking of other Western companies which have been considering to reduce their dependency on
China for manufacturing or key materials in the wake of Beijing's indirect support to Russia for its
invasion in Ukraine and lockdowns in some cities to fight Covid-19.
According to analysts, over 90 per cent of Apple products including iPhones, iPads and MacBook
laptops are manufactured in China by outside contractors. Responding to Apple's supply chain
challenges in April, Chief Executive Officer Tim Cook said, "Our supply chain is truly global, and so
the products are made everywhere. We continue to look at optimising." The lockdowns imposed in
Shanghai and other cities as part of China's anti-Covid policy have disrupted supply-chain for many
Western companies.
In April, Apple warned that the resurgence of COVID-19 will hinder the sales by as much as USD 8
billion in the current quarter. China's strict anti-Covid rules have stopped Apple from sending its
executives and engineers into the country over the past two years, which means that it becomes
hard for them to check the production sites in person. The power outages last year also dented
China's reputation for reliability. Except India, China was the one which have the pool of qualified
workers that exceeds the entire population of many alternative countries in Asia.
Apple sees India as the closest thing to the next China, as both of them are similar in population and
both offers low cost, Wall Street Journal reported citing people who are familiar with the matter.
Apple is in conversation with some existing suppliers about expanding in India, including production
for export, people familiar with the matter said. India made 3.1 per cent of the world's iPhones last
year, and the proportion is forecast to increase to 6 per cent to 7 per cent this year, according to
research firm Counterpoint.

According to some analyst and suppliers, there will be the difficulty for the China-based assemblers
in setting up the shop as the relation between New Delhi and Beijing have deteriorated since the two
countries' militaries fought a deadly clash in 2020. This was the reason that China-based
manufacturing contractors who are in business with Apple is seeking for Vietnam and other
Southeast Asian nations, according to people familiar with the matter.

Vietnam, on other hand is already a smartphone manufacturing hub for Apple's rival, Samsung
Electronics Company. South Korea-based Samsung, which has limited its exposure to China
manufacturing. Luxshare Precision Industry Co., a China-based manufacturing contractor is already
making the AirPods earbuds for Apple in Vietnam. Even the Luxshare's clients are worried about the
problems with the power supply and China's zero-covid policy. Luxshare said these clients were
asking manufacturing partners to look outside the China when they carry out key preliminary work for
mass production, a stage known as new product introduction, or NPI.

Taiwan-based assemblers Foxconn Technology Group and Wistron Corp. is a step ahead and has
already set up factories in India to produce the iPhones mainly for that country's domestic market,
where Apple sales are growing rapidly. In April, Apple said that it has begun producing the latest
generation of iPhones and iPhone 13 series in India.
Such steps require considerable investment by suppliers, analysts and suppliers said, which makes
them uneasy at a time when the global economic outlook is clouded by high commodity prices, the
war in Ukraine and stock-market gyrations.
Cash is important in uncertain times, a contractor executive said, but suppliers need to go where
Apple goes if they want to keep the business.
Source: Business Standards, 2022

QUESTION ONE [30]
In April, Apple warned that the resurgence of COVID-19 will hinder the sales by as much as USD 8 billion in the current quarter.
Critically discuss six (6) key challenges that managers would have faced in light of the article above.

QUESTION TWO [20]
Conduct a SWOT analysis for Apple Inc. considering the recent changes as outlined in the article.