Although it seems that the coronavirus in China won’t impact Apple’s ‘iPhone 9’ production after all, but the company’s supply chain may not completely escape the consequences of the ongoing viral outbreak.
While earlier reports suggested that production was slowing down throughout China as a result of factories closing on orders from the Chinese government to prevent the spread of the virus, Foxconn made a statement to Bloomberg earlier this week that said that the virus had only had a “fairly small impact” on iPhone production, since its key manufacturing centre is several hundreds of miles away from the epicentre of the outbreak.
However, it seems that some of Apple’s other suppliers may not be so fortunate. According to a report from Nikkei Asian Review, Apple’s plans to aggressively ramp up production of its AirPods have hit a snag as those particular suppliers in China have also been forced to shut down.
Slowing Production
Apple’s AirPods and AirPods Pro have been insanely popular, capturing over half of the true wireless headphone market and becoming a multi-billion business for Apple by themselves. They’re flying off the shelves and the only reason Apple isn’t selling even more is that the company simply can’t make them fast enough, in a repeat performance of the shocking success of the original AirPods back in 2016.
So needless to say, Apple has been pushing its supply partners to crank out even more of the wireless earbuds, reportedly asking them to produce up to 45 million units in the first half of 2020 just to keep up with the demand, which has pushed factories to begin working their production lines almost non-stop.
Because of the virus outbreak, it has already been about two weeks since the assemblers have shipped any new AirPods series. All of the stores and carriers selling Apple products are really counting on suppliers to resume work next week.
Unfortunately, this is one area where even the temporary closure of plants due to the coronavirus has caused Apple’s supply chain to take a big hit. While Apple’s three primary AirPods manufacturing partners, Luxshare, Goertek, and Inventec, are all set to resume production on Monday, the shutdown of almost all of their upstream suppliers has created component shortages that will slow down their production lines.
The Chain Falls Apart
At this point, sources have told Nikkei that the main manufacturers have “at most” only two weeks’ worth of materials and other components needed to assemble the AirPods, and they’re going to have to wait for component makers to restart their operations before they can receive fresh supplies. As a result, the AirPods assemblers don’t think they can reach more than 50% production in the first week, and even that figure may be optimistic.
It’s still an open question whether the upstream suppliers that the assemblers rely on will be able to smoothly resume their own production lines to produce enough parts for the final assembly; even one weak link in the chain could cause everything else to come to an abrupt halt.
Even after every plant fully reopens, travel restrictions in towns across China are likely to create labour shortages, slowing down production across the board. On top of this, companies are reportedly being cautious about ramping up production too quickly due to concerns that calling back tens of thousands of workers all at once could increase the risk of the virus hitting their factories and resulting in the need to quarantine large groups of workers or even entire plants, causing things to once again grind to a halt.
Although Apple has been urging its suppliers to build production facilities outside of China, specifically in northern Vietnam, this became less urgent as the U.S.-China trade war began to de-escalate, and the majority of AirPods production still remains in China.
Most analysts believe that this won’t really affect demand for what is easily Apple’s most popular product right now, and in fact the scarcity could actually increase demand by adding to the cachet of getting one’s hands on a pair. While the standard second-generation AirPods can still be found in stock at most Apple Stores, there is a one-month waiting period for the premium AirPods Pro, and stock of either version at non-Apple retail stores may continue to be considerably more scarce in the coming weeks as Apple reserves what it can get for its own online and retail stores.