Armstrong Economics Blog/China Re-Posted Nov 3, 2022 by Martin Armstrong
China is losing business by implementing lockdowns that also prolong the global supply chain shortage. The Zhengzhou Airport Economy Zone in Henan province is currently under lockdown. This is where Apple’s largest manufacturing plant is located. The Chinese government said that the lockdown would last for only seven days, but we have seen their lockdowns expand numerous times. All it takes is one single case of COVID for the policy to change, and businesses cannot plan ahead.
Foxconn, the largest iPhone manufacturer, stated that they experienced a COVID outbreak in their factory. Foxconn already requires employees to take a COVID test within 24 hours of entering the building, and vaccinations are highly encouraged.
Apple’s earnings report released last week showed that the company remains strong. However, their iPhone revenue failed to meet expectations. Apple has been unable to provide fiscal guidance since 2020 due to uncertainty.
To avoid this uncertainty, Apple is moving around 5% of its global iPhone 14 production to India. Analysts at JPMorgan believe the company may produce a quarter of all iPhones in India by 2025. India also happens to be the second-largest smartphone market in the world, but Apple only secured 3.8% of the market last year as it competes with Xiaomi and Samsung.
“The new iPhone 14 lineup introduces groundbreaking new technologies and important safety capabilities. We’re excited to be manufacturing iPhone 14 in India,” the company stated in September, hinting at the global fear of the Chinese government using technology for intelligence purposes. The low cost of manufacturing items in China may not outweigh the revenue loss caused by abrupt and frequent lockdowns.