For the first time, Apple is moving some iPad production out of China, shifting operations to Vietnam after strict Covid-19 lockdowns in and around Shanghai led to months of supply chain disruptions, Nikkei Asia reported.
Nikkei cited its sources as saying the U.S. giant has also asked multiple component suppliers to build up their inventories to guard against future shortages and supply snags.
China's BYD, one of the leading iPad assemblers, has helped Apple build production lines in Vietnam and could soon start to produce a small number of the iconic tablets there, insiders told the Japanese paper.
Apple has long considered building some iPads outside of China, as reported by Nikkei Asia in January last year, but the sudden surge in Covid-19 cases in Vietnam a few months later delayed plans to follow through.
The iPad will become the second major line of Apple products made in the Southeast Asian country, following the AirPods earbud series. The move highlights not only Apple's continuous efforts to diversify its supply chain but also the growing importance of Vietnam to the company. Apple shipped 58 million iPads last year, with the vast majority of the device's suppliers concentrated in China.
To further guard against supply chain disruptions, according to Nikkei, Apple has also asked suppliers to build up additional supplies of components such as printed circuit boards and mechanical and electronics parts, especially those made in and around Shanghai, where Covid-related restrictions led to shortages and logistic delays. In addition, the company has asked suppliers to move quickly to secure supplies of some chips, especially power-related ones, for the upcoming iPhones.
In particular, Apple is asking suppliers outside of the lockdown-affected areas to help build up a couple of months' worth of component supplies to ensure supply continuity over the next few months. The requests apply to all of Apple's product lines - iPhones, iPads, AirPods and MacBooks, Nikkei quoted its sources.
Suppliers in Jiangsu province and Shanghai have gradually resumed some production since early to mid-May, but most have said it could take at least a couple of months for manufacturing capacity to return to normal, according to Nikkei.
A Nikkei report on Wednesday revealed the local government in Shanghai said it would further open up the city - which is home to 28 million people - by June 1, with a focus on helping businesses return to normal operations.
Ivan Lam, an analyst with Counterpoint, told Nikkei he expects it would still take until the second half of June for life to return to normal as the government avoids rushing things in its attempt to get life and work routines back on track.
"We still expect the impacts on big multinational companies like Apple to be controllable," Lam told Nikkei Asia. "But the impacts on automotive, PC and some smaller Android phone makers could be more severe as they have a more rooted supply chain there that they are not likely to find alternatives to very soon."