In Greek mythology, Zeus punished Sisyphus for dishonest demise by forcing him to roll an enormous boulder uphill for eternity. I think Apple’s operations groups 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’ll to salvage affairs because the scenario in Taiwan decays, which might be an existential risk to the corporate and its enterprise.
The unimaginable uphill journey
It’s not simply Apple, in fact — all the 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 lately warned that any additional stress in Taiwan would generate huge issues.
Liu additionally famous the sophistication of the tech trade provide chain, telling CNN: “As a result of that is such a complicated manufacturing facility, it depends upon real-time reference to the skin world, with Europe, with Japan, with US, from supplies to chemical compounds to spare elements to engineering software program and prognosis.”
Relating to manufacturing, the significance of China to the Apple provide chain was actually purchased dwelling when COVID-related lockdowns meant Apple couldn’t make sufficient Macs or iPads to fulfill demand. In that context, it appears counterintuitive that Apple this week instructed company workers that they not must put on masks to guard towards COVID-19.
A danger to assumptions?
I think about the ops groups take braveness that their means to handle and execute Apple’s enterprise in difficult market situations nonetheless enabled the corporate to attain file ends in its final quarter, and to anticipate development into the September quarter. All the identical, Apple CFO Luca Maestri was maybe extra real looking 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 steering, however we’re sharing some directional insights based mostly on the belief that the macroeconomic outlook and COVID associated impacts to our enterprise don’t worsen from what we’re projecting in the present day for the present quarter.”
The corporate should be praying relations between China and Taiwan don’t deteriorate extra. Such an consequence would devastate product manufacturing and would create horrible turmoil. FBI Director Christopher Wray lately warned that battle between the 2 nations would “symbolize one of the vital horrific enterprise disruptions the world has ever seen.”
Can we diversify quick sufficient?
Apple is doing what it will possibly to construct a extra resilient provide chain, however it’s an uphill journey. Digitimes suggests it’s urging suppliers to arrange manufacturing services in Vietnam and to diversify manufacturing throughout a number of factories. The corporate can be portioning out manufacturing of a few of merchandise amongst extra suppliers to assist construct resilience.
TSMC is predicted to open a $12 billion Apple Silicon manufacturing facility in Arizona, with help underneath the at-last handed Chips and Science Act. However even this gained’t be operative for not less than a 12 months. Typically, Apple (and everybody apart from Apple) is just not but in a position to diversify manufacturing outdoors 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 signifies that whilst 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 facility in Mexico gained’t be on-line till the tip of 2023, based on native media stories.)
That is of explicit significance as Apple allegedly prepares to introduce what it absolutely hopes will turn into its subsequent “pillar” product, AR Glasses, in all probability subsequent 12 months. It’s cheap 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 group.
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