Lockdowns and supply chain disruption to accelerate Apple’s move away from China, with India a likely beneficiary, analysts say

Apple’s value chain in China, an emblem of the country’s global role as a source of labour and assembly, has been hit hard by strict lockdowns in Shanghai and neighbouring provinces, raising the risk that the US tech giant may accelerate a shift of its operations away from China, say analysts.

While it is hard to put an exact figure on the losses resulting from the disruption to transport and production along Apple’s extensive value chain in China, chief financial officer Luca Maestri told a conference call on Thursday that Covid-19-related lockdowns and a chip shortage would reduce the company’s revenue by up to US$8 billion in the June quarter.

Maestri said this was “substantially larger than” the impact in the previous quarter and also warned about the likely knock-on effect of reduced consumer demand in China due to lockdowns.

Apple’s close links with China have, historically, been underpinned by two main factors. First, the country is an ideal assembly centre for the California-based tech giant, thanks to its advanced infrastructure, skilled labour force and efficient logistics services. Components from Taiwan, South Korea and elsewhere are assembled into iPhones and iPads on factory floors in China for the whole world to buy.

Secondly, China itself is the second-largest market for Apple, thanks to the country’s growing middle class, which has become increasingly affluent over the past decade, say analysts.