After months of supply chain disruptions due to strict lockdowns in and around Shanghai, US tech giant Apple is, for the first time, moving some of its iPad production capacity out of China and shifting it to Vietnam.
The US company also asked its multiple component suppliers to build up stocks to guard against future shortages and supply bottlenecks.
China's BYD, a leading assembler of iPads, helped Apple build production lines in Vietnam. It could soon start producing a small number of popular tablets there.
Apple has long considered building some iPads outside of China. But the sudden rise in coronavirus cases in Vietnam after a few months delayed plans.
The iPad manufacturing line becomes the second major line of Apple products made in Southeast Asia, after the AirPods series.
The move highlights the company's ongoing efforts to diversify its supply chain and the growing importance of Vietnam to the company.
Apple shipped 58 million iPads last year, with the vast majority of device suppliers concentrated in China.
To further protect against supply chain disruptions, Apple has also asked suppliers to prepare additional supplies of components, especially those made in and around Shanghai, where coronavirus-related restrictions have led to shortages and logistical delays.
In addition, the company has asked suppliers to move quickly to secure supplies of some chips, especially power ones, for the upcoming iPhones.
The company is asking suppliers outside the affected areas to help prepare two months' worth of supplies in order to ensure continuity of supply over the next few months.
The orders apply to all of the company's product lines, including iPhone, iPad, MacBook and AirPods.
The company hopes that these suppliers will be able to supply enough additional components to fully offset the volumes made by those in Shanghai and neighboring provinces such as Jiangsu, where the risk of supply chain disruption is higher.
Apple asks suppliers to prepare additional inventory as a contingency plan
It is dangerous for any tech supplier to fully comply with Apple's request, given that there are signs of slowing consumer electronics demand amid looming inflation and rising energy costs.
These additional stocks prepared for the company may become a heavy burden on the suppliers if the production of other suppliers is not disrupted by the shutdown again.
Most suppliers agree to build some additional stocks as a buffer stock. But they will not increase supplies enough to fully offset the shares of their competitors.
All of these moves demonstrate Apple's serious efforts to reduce supply chain risk. The tech giant has helped some suppliers defray the additional logistical costs of air freight and ground transportation to ensure vital materials reach production on time.
Suppliers in Jiangsu Province and Shanghai have gradually resumed some production since early May. But most said it could take at least two months for manufacturing capacity to return to normal.
Shanghai's local government said it was opening the city up by June 1, with a focus on helping businesses return to normal operations.
And a government statement said: We are canceling all unreasonable restrictions on companies to resume work and production. And we support companies' expenditures for measures to prevent the Corona virus.
The current situation may continue until the second half of June in order for life to return to normal. The government avoids rushing matters in its attempt to return life to its usual course.
The effects are expected to be in large multinational companies such as Apple to be controllable. But the effects in cars, computers, and some smaller Android phone makers could be more severe.
The Source
- Agencies