By CHRIS ILLING
CCO at ActivTrades Corp
THE mother of all consumer battles is over, and Apple is one of the winners. Americans shopped online for a record $11bn on Cyber Monday, and AirPods and MacBooks were very popular.
From a retail point of view, the start of the Christmas season has been a success. But, on the stock exchange, Apple’s price fell by almost 3 percent last Tuesday. The customers are coming, but the precious cell phones are becoming scarce. The stock is 40 percent below normal.
Company boss Tim Cook can only hope that the strained patience of his customers will pass this test. “Order today, the delivery is: December 29th,” reports the Apple site at the end of the purchase process for an iPhone 14 Pro, 128GB, Deep Purple. The package does not make it under the Christmas tree
The cause of the bottlenecks is many thousands of kilometres away from Apple’s headquarters in California. In Zhengzhou, also known as iPhone City, Apple produces around 80 percent of the new iPhones 14. Up to 200,000 workers labour there at the supplier, Foxconn. The factory was originally supposed to produce 85 million new iPhones this quarter. Now there will be six million fewer devices. A potential loss of at least $6bn in revenue for Apple.
Apple is stuck in the China trap. The US company made itself dependent on manufacturing in Asia and, ultimately, also on the regime in Beijing. China’s zero-COVID policy, which forces millions of people into lockdown with every outbreak of infection, is affecting output.
Workforce protests have flared up across the country in recent days. There were even outbreaks of violence at Foxconn last week after parts of the workforce had been barricaded in unbearable conditions for weeks.
Some observers expect that Chinese president, Xi Jinping, will relax the conditions prematurely because of the unrest. But Asia experts see the danger that the government “loses control” instead of implementing an exit from the zero-COVID policy according to plan. Even another nationwide lockdown is possible, and this will then affect the global supply chains.
Tesla is another US company that bet a lot, maybe too much, on the Chinese card. Elon Musk had promised the Chinese that his giga factory would make Shanghai “the world’s largest hub for vehicle exports”. While the US government is trying to decouple from its geostrategic rival, little criticism of the dictatorship can be heard from the new Twitter boss.
The lockdown policy hit the electric car manufacturer, and production has come to a standstill in the meantime. But, thanks to the support of the local Chinese authorities, the construction of a “closed loop”, which effectively cuts off the required workers from the outside world, succeeded apparently better than at Apple. In September, Tesla achieved the most sales since its launch in December 2019.
But the supply chain is only one of Tesla’s problems. Growing competition in the electric car segment is another risk factor for Tesla. The competition comes hot on the heels of the pioneer. In the first seven months of this year, domestic brands accounted for almost 80 percent of sales in China. Tesla is trying to counter with a bargain policy and has lowered prices. Nowhere in the world is the Model Y sold as cheaply as in China, where prices are 40 percent below those in the US.
Chinese buyers do not have to worry about their Christmas present since, according to Bloomberg, the delivery time for a Tesla has been reduced to one week.