Can Apple’s operations team handle this new crisis?

In Greek mythology, Zeus punished Sisyphus for cheating death by forcing him to roll a huge boulder uphill for eternity. I suspect Apple’s operations team feels similarly cursed. Not only did they have to adapt to the pandemic, but they had to mitigate the effect of the Russian invasion of Ukraine and now they must do what they can to save business as the situation in Taiwan decays, which could be an existential threat to the company. and his business.

The incredible uphill journey

It’s not just Apple, of course: the entire tech sector is threatened by the tension between Taiwan and China. The Apple Silicon chips used throughout its product range are made by TSMC of Taiwan. TSMC chairman Mark Liu recently warned that any further tension in Taiwan would generate major problems.

Liu also noted the sophistication of the tech industry’s supply chain, telling CNN, “Because it’s such a sophisticated manufacturing facility, it depends on real-time connection with the outside world, with Europe, with Japan. , with the United States, from materials to chemicals to spare parts for engineering software and diagnosis.

When it comes to manufacturing, China’s importance to Apple’s supply chain was truly won when COVID-related lockdowns prevented Apple from making enough Macs or iPads to meet demand. In that context, it seems counterintuitive that Apple told corporate staff this week that it is no longer necessary to wear masks to protect yourself from COVID-19.

A risk for guesswork?

I guess the operations teams have the guts to know that their ability to manage and run Apple’s business in difficult market conditions still enabled the company to achieve record results in the last quarter and anticipate growth in the quarter. September. However, Luca Maestri, Apple’s CFO, was perhaps more realistic than he hoped to be when he warned:

“Given the continuing uncertainty around the world in the short term, we are not providing revenue guidance, but we are sharing some directional insights based on the assumption that the macroeconomic outlook and COVID-related impacts on our business do not get worse than what we are projecting. today for the current quarter “.

The company must pray that relations between China and Taiwan do not deteriorate further. Such a result would devastate the production of the products and create terrible unrest. FBI Director Christopher Wray recently warned that the conflict between the two nations “would represent one of the most horrific business disruptions the world has ever seen.”

Can we diversify enough?

Apple is doing what it can to build a more resilient supply chain, but it’s an uphill journey. Digitimes suggests it is urging suppliers to set up manufacturing facilities in Vietnam and diversify production across multiple factories. The company is also splitting the manufacturing of some products among other suppliers to help build resilience.

TSMC is expected to open a $ 12 billion Apple Silicon manufacturing facility in Arizona, with assistance under the finally passed Chips and Science Act. But even this will not be operational for at least a year. In most cases, Apple (and everyone except Apple) is still unable to diversify production outside of China, even though there were enough programmers and engineers in those markets to occupy these machines.

However, the huge demand for Apple products means that even as factories in India, Vietnam and (possibly) Brazil and Mexico turn on the lights, they still can’t scale to meet all that demand. (Pegatron’s latest factory in Mexico won’t be online until late 2023, according to local media.)

This is of particular importance as Apple prepares to unveil what it hopes will surely become its next “mainstay” product, AR glasses, probably next year. It’s reasonable to think that if these products do appear, Apple will continue to rely on production across that region, generating even more headaches for that hard-working operations team.

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