Apple looks to boost output outside China amid strict anti-Covid policy

Apple has told some of its contract manufacturers that it wants to boost production outside China, citing Beijing’s strict anti-Covid policy among other reasons, people involved in the discussions said.

India and Vietnam, already sites for a small portion of Apple’s global production, are among the countries getting a closer look from the company as alternatives to China, the people said. More than 90 per cent of Apple products such as iPhones, iPads and MacBook laptops are manufactured in China by outside contractors, according to analysts. Apple’s heavy dependence on the country is a potential risk because of Beijing’s authoritarian Communist government and its clashes with the US, analysts have said.

Any move by Apple, the largest US company by market capitalization, to emphasize production outside China could influence the thinking of other Western companies that have been considering how to reduce dependence on China for manufacturing or key materials. Such consideration has stepped up this year after Beijing refrained from criticising Russia for its invasion of Ukraine and carried out lockdowns in some cities to fight Covid-19.

An Apple spokesman declined to comment. Asked generally about Apple’s supply chain in April, Chief Executive Officer Tim Cook said, “Our supply chain is truly global, and so the products are made everywhere.” He also said, “We continue to look at optimising.”

Apple was seeking to diversify away from China before Covid-19 spread around the globe in early 2020, but those plans were complicated by the pandemic. Now the Cupertino, Calif., company is pushing again and telling contractors where they should be looking to build new manufacturing capacity, the people involved in the discussions said.

Lockdowns in Shanghai and other cities as part of China’s anti-Covid policy have caused supply-chain bottlenecks for many Western companies. Apple cautioned in April that the resurgence of Covid-19 threatens to hinder sales by as much as $8 billion in the current quarter.

China’s travel restrictions have meant that Apple has curtailed sending executives and engineers into the country over the past two years, making it hard to check production sites in person. Power outages last year also dented China’s reputation for reliability. While many Western companies face similar issues in China, Apple’s size gives it bargaining power with contractors, said Ming-chi Kuo, a supply-chain analyst at TF International Securities.