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Apple is desperately trying to get out of China, but it won’t happen anytime soon


Apple

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As geopolitical tensions continue to mount, Apple (NASDAQ:AAPL) and its manufacturing partners are focusing on diversifying factories into countries other than China.

However, given the importance of the world’s largest country by population company led by Tim Cook, China is still likely to be Apple’s main focus (AAPL) investors over the next few years, according to Bank of America analyst Wamsi Mohan.

Mohan, who has a buy rating and a price target of $160 per share in Apple (AAPL) stock, noting that recent COVID-19 lockdowns in Zhengzhou, China – where about 50% of iPhone production occurs – has understandably worried investors. Some estimates have given Locks related to COVID for Hon Hai is to have an impact of up to 30% in November, but it is possible that Apple (AAPL) could shift production to other facilities to mitigate any impact, Mohan pointed out.

Mohan explained: “Although the closures cause production drags, in our view, other facilities around Shenzhen can make up for it unless additional lockdown measures take effect. force,” explained Mohan.

Mohan noted that lead times on the iPhone 14 Pro and iPhone 14 Pro Max increased by about a week, to 25 days in most countries, including China, Japan, the UK, Germany, France, and Australia.

Meanwhile, Apple (AAPL) has increased its manufacturing presence outside of China, especially in India and Vietnam.

In 2017, starting with the iPhone SE, Apple (AAPL) manufacturing partners started manufacturing iPhone units in India. And in September, the tech giant confirmed they are manufacturing some iPhone 14s in the world’s second most populous country.

JP Morgan Investment Company recently suggestions Apple (AAPL) may move a quarter of its iPhone production to India by 2025, and it is expected that 5% of its iPhone production this year will go to the country.

The company has also request suppliers move some production of AirPods and Beats headphones to India.

Vietnam has also become a major manufacturing hub for the Apple Watch and some of the company’s popular Mac computer production, along with Apple (AAPL) suppliers Luxshare Precision Industry and Foxconn are recently testing smartwatch production in the north of the country.

Despite these efforts, Mohan noted that a “rapid decoupling” from China is unlikely anytime soon, given the presence of manufacturing partners and increased focus on design and assembly. modular and automatic.

“In our opinion, a significantly higher focus on System-on-Chip and more modular design is required. [and] Mohan wrote.

Given the overwhelming importance of Apple (AAPL) financial impact on China, both for themselves and for third parties, is it possible that China could retaliate against the world’s largest company?

Not directly, Mohan believed.

If anything happens, especially in light of the US move to restrict China’s semiconductor industry, it is possible that domestic products could receive “preferential subsidies”, which Mohan said. can restrict Apple (AAPL) evolution. However, China and Apple (AAPL) is engaged in the hip for a while.

“Given Apple remains a major indirect employer in China and close ties between city, provincial, and central government levels, we expect Apple to continue to navigate the flow of US- China as they have done very well in the last few years,” Mohan posed.

This week, Morgan Stanley wondered if Apple’s decline (AAPL) App Store may bottom in September.

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