Apple is reportedly advising some of its manufacturing partners that it wants to expand production outside of China.
According to the Wall Street Journal, over 90% of Apple's products are manufactured in China by contractors, but tensions between China's government and the U.S. make the company's reliance on China worrisome.
Furthermore, COVID lockdowns in China have caused supply-chain issues.
According to anonymous sources cited by the Journal, India and Vietnam are high on the list of potential manufacturing expansion sites.
Reuters previously reported that lockdowns in China could result in a shortage of millions of iPhones.
Despite this, the Journal highlighted that China remains a desirable location for device manufacturing due to the country's strong manufacturing environment, competent labor, and low costs, as well as its large domestic market for gadgets. China accounts for around one-fifth of Apple's global sales.
During trade tensions between China and the U.S., the Journal reported in 2019 that Apple was considering transferring a large portion of its device manufacture to other countries. According to the new report, the pandemic hampered such ambitions, but Apple has refocused on the problem.
According to the Journal, Apple believes India to be the next best location due to its low prices and vast population. iPhones are already being manufactured there for the Indian market, with Apple product sales rapidly expanding.
However, due to tight relations between the two governments, contract manufacturers located in China may have difficulty setting up shop in India, according to the Journal, making Vietnam and other Southeast Asian countries attractive locations.
Samsung Electronics Company, Apple's competitor, already has a smartphone production facility in Vietnam. Samsung, based in South Korea, has minimized its exposure to Chinese manufacturing.
This move by Apple, the largest company in the United States in terms of market capitalization, may affect the thinking of other Western companies that have been considering reducing their reliance on China for production or key materials.
The plan comes in the aftermath of Beijing's indirect support for Russia's invasion of Ukraine, as well as lockdowns in several areas to combat COVID.
Apple warned in April that the reappearance of COVID-19 may stymie sales by up to $8 billion this quarter. Over the last two years, China's tough anti-COVID regulations have prevented Apple from bringing its executives and engineers into the country, making it difficult for them to inspect production locations in person. Last year's power outages tarnished China's reputation for reliability.
