In Greek mythology, Zeus punished Sisyphus for dishonest dying by forcing him to roll an enormous boulder uphill for eternity. I think Apple’s operations teams feels equally cursed. Not solely have they needed to adapt to the pandemic, however they needed to mitigate the impact of Russia’s invasion of Ukraine and should now do what they will to salvage affairs because the situation in Taiwan decays, which could possibly be an existential menace to the corporate and its enterprise.
The unbelievable uphill journey
It’s not simply Apple, after all — the complete tech trade stands threatened by stress between Taiwan and China. Apple Silicon chips used throughout its product vary are made by Taiwan’s personal TSMC. TSMC Chairman Mark Liu not too long ago warned that any additional stress in Taiwan would generate massive issues.
Liu additionally famous the sophistication of the tech trade provide chain, telling CNN: “As a result of that is such a classy manufacturing facility, it depends upon real-time reference to the surface world, with Europe, with Japan, with US, from supplies to chemical substances to spare components to engineering software program and prognosis.”
Relating to manufacturing, the significance of China to the Apple provide chain was actually purchased residence when COVID-related lockdowns meant Apple couldn’t make enough Macs or iPads to meet demand. In that context, it appears counterintuitive that Apple this week advised company workers that they now not must put on masks to guard towards COVID-19.
A threat to assumptions?
I think about the ops groups take braveness that their skill to handle and execute Apple’s enterprise in difficult market situations nonetheless enabled the corporate to attain document leads to its final quarter, and to anticipate development into the September quarter. All the identical, Apple CFO Luca Maestri was maybe extra life like than he’d hoped to be when he warned:
“Given the continued uncertainty world wide within the close to time period, we’re not offering income steerage, however we’re sharing some directional insights primarily based on the belief that the macroeconomic outlook and COVID associated impacts to our enterprise don’t worsen from what we’re projecting at present for the present quarter.”
The corporate should be praying relations between China and Taiwan don’t deteriorate extra. Such an final result would devastate product manufacturing and would create horrible turmoil. FBI Director Christopher Wray recently warned that battle between the 2 nations would “symbolize one of the crucial horrific enterprise disruptions the world has ever seen.”
Can we diversify quick sufficient?
Apple is doing what it could to construct a extra resilient provide chain, but it surely’s an uphill journey. Digitimes suggests it’s urging suppliers to arrange manufacturing amenities in Vietnam and to diversify manufacturing throughout a number of factories. The corporate can be portioning out manufacturing of a few of merchandise amongst further suppliers to assist construct resilience.
TSMC is expected to open a $12 billion Apple Silicon production facility in Arizona, with help beneath the at-last handed Chips and Science Act. However even this gained’t be operative for no less than a 12 months. Most often, Apple (and everybody aside from Apple) will not be but capable of diversify manufacturing exterior China, even when there have been sufficient coders and engineers in these markets to workers these machines.
All the identical, the massive demand for Apple’s merchandise implies that at the same time as factories in India, Vietnam and (maybe) Brazil and Mexico swap on the lights, they nonetheless can’t scale to fulfill all that demand. (Pegatron’s newest manufacturing unit in Mexico gained’t be on-line till the end of 2023, based on native media stories.)
That is of specific significance as Apple allegedly prepares to introduce what it absolutely hopes will develop into its subsequent “pillar” product, AR Glasses, most likely subsequent 12 months. It’s affordable to assume that if these merchandise do seem, Apple will nonetheless be reliant on manufacturing from throughout that area, producing but extra complications for that hard-working operations staff.
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