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Apple, iPhones, and China: Short-term problems need a long-term fix


Apple’s iPhone production problems in China add yet another chapter to the collapse of previous supply chain models, ongoing political tension and exposure to disaster; all have underlined the need to diversify across every aspect of manufacturing to become more resilient.

Crisis management is no dawdle

The impact of these challenges on Apple means the company has perhaps lost millions of iPhone sales in the current quarter. That’s a challenge, but Apple is by no means unique in relying on a supply and manufacturing ecosystem that has proved less resilient than we need in these changing times.

Yes, for Apple, rioting workers in China is not a good look, and the attempt to keep COVID-19 in check there has evidently failed, to the probable detriment of us all. Surely, the current conflation of crises shows that the future of manufacturing must be multi-site and international.

Building the future supply chain

That’s why I believe Apple, and I imagine every other firm, will develop plans to double, or even triple manufacturing hubs across their chains. That means Apple and TSMC may manufacture advanced processors at the new factory in Arizona while at the same time also making chips elsewhere. They’re going to want to multi-source strategic components — and hardware assembly — to provide a bulwark against any future disasters. Setting up this kind of resilience will take time, but Apple is on the fast track to putting this in place.

I also think the need to build such resilience may turn out to be one of the reasons we’re suddenly hearing that new products (Apple Car, Apple Glass) may not turn up until 2026 and late 2023, respectively, rather than earlier dates discussed before. Apple will want to take time not just to develop the products, complex as doing so may be, but also to develop these more resilient manufacturing and supply chains, not to mention building increasingly circular manufacturing capacity. (That Apple Car you drive after 2026 might contain more recycled raw materials than anything else on the road.)

Change doesn’t come cheap

All this activity will almost certainly translate into more expensive products. You can’t build a resilient, distributed, doubled-up system that’s as efficient as a less-resilient “just in time” system for the same price, which means production costs will increase.

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