Apple supply chain crisis, a series of Chinese companies “follow”

According to a report from local media, disruptions to Apple’s supply chain and cost control measures amid chip and component shortages caused by the COVID-19 pandemic are taking a heavy toll on Apple’s business. financing of suppliers and distributors in China.

And this has “sounded alarm bells” for companies that “depend too much” on Apple, according to Securities Daily.

oung customers look at iPhones at an Apple Store in Los Angeles, USA in November. Photo: AP

And clearly, being an Apple supplier is no longer a guarantee of stellar business growth.

Among Apple’s mainland suppliers, Lens Technology, which supplies iPhone lenses and components, reported a 35 percent drop in net profit year-on-year to $155.3 million in the quarter. July-September. Meanwhile, mobile antenna supplier Shenzhen Sunway Communication also reported a 26.8% drop in net profit during the same period.

Meanwhile, Shenzhen Deren Electronic, a major partner of Apple in Shenzhen, recorded a net loss of 10.2 million USD, or 227% year-on-year. Suzhou Victory Precision Manufacture, a supplier of battery modules and components, also reported a net loss of $4.7 million, down 176% year-on-year.

“Amid rising raw material prices and a supply chain crisis, Apple has continued to compress suppliers’ profit margins to reduce costs,” said Lin Zhi, principal analyst at Wit Display. “This has brought greater cost pressure on suppliers.”

Apple did not immediately respond to a request for comment on the matter.

The results of these Chinese companies’ earnings reports were released in October, a time when Apple was seeing millions of units less than its production target. The main cause is the supply chain crisis, caused by social distancing in many countries, energy cuts in China, and rising geopolitical tensions between the US and China. The company also launched its new iPhone 13 and iPad lineup in September.

In September and October, iPhone 13 production fell by 20% compared to the previous plan, even though the US company has prioritized all the components needed for smartphones from component sources in other products, according to a report by Nikkei Asia.

During the same period, iPad production volume was about 50% lower than planned, and production forecasts for older iPhone generations also fell about 25%, due to Apple reallocating components and resources, Nikkei news.

According to Securities Daily , an iPhone distributor said in previous years they would lower the prices of some iPhone models to boost sales during the year-end. However, there is no possibility of a price drop this year due to tight supply.

Apple has added more suppliers from China than anywhere else to its list of suppliers over the past three years. According to SCMP’s analysis of Apple’s supplier list for 2017 and 2020, nearly a third of the newly shortlisted companies came from China.

And of the 200 companies on Apple’s 2020 supplier list, 98% of the companies are directly involved in the materials, production and assembly of products. Nearly 80% of these suppliers have at least one manufacturing site in China.

Refer to SCMP