Unrest in China and iPhone production, continued trade war

Hello.

Reading news from China and the USA, you involuntarily synthesize a new meaning from them, they overlap so much

each other and paint a complete picture of the world.A crisis is developing in the world, sales of electronics are steadily falling, and this applies to almost all manufacturers, with the exception of Apple. From the company's reports, it appears that iPhone shipments to channels are holding steady, and research firms support this narrative—as if the crisis exists for everyone but Apple. The corporation itself refuses to give forecasts of future sales, as the market remains unstable and poorly predictable.

All events take place against the background of the US trade waragainst China, which was started by the Trump administration and did not stop for a minute. America constantly imposes certain restrictions, the latest being a ban on the supply of high-performance processors to China for creating supercomputers and AI computing. The irony is that formally such processors are manufactured in China, and not only in Taiwan, which is not physically controlled by China, but also in the mainland. There are plenty of absurdities in this trade war, but the style in which China responds to attacks is very characteristic of the country. Publicly - only the latest Chinese warnings. In the real plane, certain troubles constantly occur in China, which “accidentally” affect the production of goods needed by America and other countries of the world. As a result, the cost of goods is growing, which further spurs inflation, exacerbates the global crisis.

Apple is hostage to cheap labor in Chinathe fact that the bet is made on production in this country. The corporation cannot leave China in the foreseeable future, although it is taking steps to do this, for example, transferring part of its capacities to Vietnam and India. The factory in Vietnam is oriented to the outside world, while the Indian production is more likely to serve to increase sales within this country, not export-oriented. There is one catch in the transfer of production to Vietnam that can be frustrating: most of the production is transferred not from mainland China, but from Taiwan. The reason is the political conflict around the island, the possibility of a forceful solution to this problem and the subsequent destruction of supply chains. Companies such as Foxconn, Luxshare, Pegatron, Wistron are trying to create an airbag, opening their factories in Vietnam. But they cannot completely transfer production to another country. JPMorgan forecasts that by 2025, Apple production in China will fall from the current level of 95% to 75%. But there is no question of a total rejection of production in China, it is impossible in principle. Apple is completely dependent on China, just as China benefits from such cooperation. Perhaps Apple would like to escape somewhere, but such an escape from China is unlikely for the company.

Apple's main partner is Foxconn.Every time Apple announces the opening of some kind of production outside of China, for some reason problems begin at Foxconn and the production of the same iPhones falls. Every time! You can trace this chain of coincidences, inexplicable from the point of view of statistics. The feeling that there is a god in China, zealously following this topic and cursing Apple in their attempts to leave the country.

In autumn, China began to introduce new restrictions,related to the pandemic, while the rest of the world seems to have forgotten about it, now everyone is worried about completely different problems. The number of cases of COVID-19 infections in China is growing, entire regions are being closed. In fact, nothing has changed compared to 2020, production is getting up. With the same iPhone, everything is rather sad, and this, provided that the volume of production has not increased, remains at a low level. At the end of November, riots began at Foxconn, workers demanded payment of salaries, bonuses, and so on.

An outbreak occurred at a factory in Zhengzhou in OctoberCOVID, conveyors were stopped - in the press this city is often called the city of the iPhone, since the bulk of smartphones are assembled here. Foxconn's factories are huge and employ tens of thousands of people. Even the temporary closure resulted in more than a hundred thousand people leaving the factories. In early November, Foxconn recruited new workers, the number of one hundred thousand people was called in the Chinese media, and it was presented only in positive tones as an increase in the number of jobs. A regular worker's salary starts at 2,300 yuan per month, and with overtime and a 10-12-hour day, it can double. In addition to the salary, a bonus was offered, for the first thirty days of work 3,000 yuan (about 25 thousand rubles), after another month - the same amount. That sounds good? Perhaps so, if you do not know about the slave working conditions at Foxconn, where historically the highest number of suicides among workers. Dormitory nets stretched between floors first appeared here, too often people took their own lives by rushing down. Repeatedly was at different factories, including in this city. It's a sweatshop where people are squeezed dry.

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The details of the offer from Foxconn turned out to beasterisk, the company is well behind its iPhone production schedule, as the closure prevented the production of a new line of devices. Pressure from Apple increased, the company demanded its products as quickly as possible. Hence a number of erroneous actions. In particular, the fabulous conditions for workers turned out to be a trick, the first payment could be received only on March 15, the second - on May 15. For Chinese workers, the Lunar New Year is a family holiday, life in the country freezes for several weeks. The terms from Foxconn suggested that the workers would have to spend that time in factories instead of with their families. And this created tension that resulted in riots.

Foxconn management immediately tried to explain everythingtechnical error, here is the company's statement: "We apologize for the error in entering the computer system and guarantee that the actual payment will be the same as agreed." In total, there were about 200,000 people at the factory at the time of the protests. Foxconn offered the workers a one-time payment of 8,000 yuan to stop the unrest and return to their dormitories. Then they also received an additional payment of 2,000 yuan. In fact, the unrest after these payments ceased. According to the most minimal estimates, about 20 thousand workers left the factory during the riots.

Even if we assume that the factory will startwork as usual since the beginning of December, shipments to Apple will be restored only at the beginning of the year. This is the only factory in the world that produces the iPhone 14 Pro / Pro Max, and Apple has almost no stock of these smartphones.

The Best Buy retail chain said that during the seasonhigh sales, they will have a shortage of iPhone 14 Pro / Pro Max. According to a number of reports from the USA, these smartphones in certain colors and memory sizes are no longer available in the American Apple Store, the shortage is growing. Research firm Wedbush claims US iPhone inventories are currently 25-30% lower than usual this season. Which is shifting demand to older models, such as the iPhone 12, or pushing buyers to choose other manufacturers. As part of Black Friday, sales of Pixel 7/7 Pro increased, smartphones are perceived as an interesting offer in terms of price / quality ratio, but they attract buyers with discounts. So, Pixel 7 in the basic version is offered for $499. And most importantly, these smartphones are available.

For the quarter, iPhone retail sales maymissing at least two million smartphones, while you need to understand that this year is already characterized by a reduction in the market, including in the high season. In Russia, there is no time for the iPhone at all, sales are declining sharply.

Apple's dependence on China will not disappear, and forpressure on the US as part of a trade war is convenient, there will always be random restrictions that will reduce iPhone sales. This is a clearing of the market, including for own brands, which will be in great demand for objective reasons. All markets are falling, and a company that does not control production, is completely dependent on China, has not very high chances of success, especially since the iPhone is the most expensive smartphone on the planet. And here it does not matter whether there will be new riots at Foxconn, whether there will be a logistics crisis (another one), whether there will be a shortage of some components, the important thing is that the logic of market development and changes in consumer behavior dictate the choice of other solutions. Now is not the time for the iPhone. But this product, among other things, becomes a hostage in the US trade war against China, a convenient lever for China's response. Therefore, wait for news about the production of the iPhone, more precisely, about problems in such industries in China. Something tells me that there might be a fire or some other random event that could not have been predicted in advance.