Apple will take years to diversify from Chinese factories: Counterpoint

A display of iPhone 14 smartphones at Apple Inc. Regent Street store in London, UK.

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Apple will take years to diversify from its Chinese factories, even as the country pursues its zero Covid policy that is hurting iPhone production, according to Jeff Fieldhack of Counterpoint Research.

“It will take years for Apple to diversify,” the research director told CNBC’s “Squawk Box Asia” on Tuesday, explaining that Apple’s latest iPhones will likely continue to be made in China for the next few years.

In a statement on Sunday, Apple said it had temporarily curtailed iPhone 14 production as its main iPhone 14 Pro and iPhone 14 Pro Max assembly plant in Zhengzhou, China is operating at “significantly high capacity.” reduced” due to Covid-19 restrictions.

Apple has diversified its device assembly process outside of China and opened factories in countries south of China, such as India and Vietnam.

“Having said that, there are devices that could be assembled in other countries like India, but it’s a very, very small amount,” he said.

Apple shares are down 20% year-to-date.

Fieldhack suggested that the sheer number of workers Apple hires in China could potentially be used as bargaining chips with the Chinese government, since the iPhone maker hires around 200,000 people at its Zhengzhou factory.

“Apple can say, ‘Hey, we have more employees in China than in the United States.’ other decisions,” Fieldhack added.

Given that the iPhone 14 models are popular and loved, “we expect the vast majority of consumers to expect these devices to be available,” he said.

It currently takes 31 days to receive an iPhone 14 Pro after placing an order through Apple’s website, compared to the average 2 days for cheaper iPhone models, JPMorgan analyst Samik said on Sunday. Chatterjee in a note.

Bullish on Apple

“The good news is that Apple isn’t completely hardware dependent. It has a broad portfolio of services and you’re going to see its services grow over time as it adds more services,” said Ray Wang, Founder, President and Principal Analyst. or constellation research.

“Now the challenge is to continue to have blockages in the Foxconn factory in Zhengzhou, we’re having a bit of a hard time because you can’t provide people with devices, but people still want high-end iPhones and don’t necessarily want low-end phones,” he told ” CNBC’s Squawk Box Asia”.

Ray Wang explains why he's bullish on Apple and what China's expected production cuts could mean

Counterpoint Research estimates a 10% decrease in production volume of mainly iPhone 14 Pro and Pro Max models over the next two weeks, due to the disruption in Zhengzhou.

Fieldhack said he’s confident Apple will do everything possible to ship as much as possible, reducing delays in the supply chain or speeding up shipping.

“It’s time to make adjustments to affected factories, like moving some production to the south which has some Pro and Pro Max manufacturing,” he said..

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