It will take Apple years to diversify its products from China factories: Counterpoint

apple It will take years to diversify from its Chinese factories, even as the country continues its zero Covid policy Damage to iPhone productionaccording to Jeff Feldschack of Counterpoint Research.

“It will take years for Apple to diversify,” the director of research told CNBC.Squawk Box Asia“Tuesday, explaining that Apple’s latest iPhones will likely continue to be manufactured in China for the next few years.

In a statement on Sunday, Apple said it was temporarily reducing iPhone 14 production as its primary iPhone 14 Pro and iPhone 14 Pro Max assembly plant in Zhengzhou, China operates at “significantly reduced capacity.” Due to Covid-19 restrictions.

Apple is diversifying its hardware assembly away from China and opening factories in southern Chinese countries, such as India and Vietnam.

“Having said that, there are devices that can be assembled in other countries like India, but it’s a very, very small amount,” he said.

Apple shares are down 20% so far this year.

Feldhak suggested that the huge number of workers Apple hires in China could be used as a bargaining chip with the Chinese government, as the iPhone maker hires about 200,000 employees at the Zhengzhou factory.

“Apple can say, ‘Hey, we have more people in China than we have in the US,’ which is very powerful and really helps them avoid any Chinese retaliation against the US through tariffs or other decisions,” Feldhack added.

And because iPhone 14 models are popular and loved, “we expect the vast majority of consumers to wait for these devices to become available,” he said.

It currently takes 31 days to receive an iPhone 14 Pro after placing an order via Apple’s website, compared to an average lead time of two days for less expensive iPhone models, according to JPMorgan analyst Samik Chatterjee. He said in a note Sunday.

“The challenge now is if we continue to shut down the Foxconn factory in ZhengzhouAnd the We’re in a little trouble because you can’t get devices to people, but people still want high-end iPhones and don’t necessarily want lower-end phones,” he told CNBC.Squawk Box Asia” Tuesday.

Counterpoint Research estimates a 10% drop in production volume for the iPhone 14 Pro and Pro Max models primarily over the next two weeks, as a result of the turmoil in Zhengzhou.

Feldhak said he’s confident Apple will do everything it can to ship as much as possible, by reducing timelines in the supply chain or speeding up shipping.

“There is plenty of time to make adjustments to the affected plants, such as moving some production to the south where there is some Pro and Pro Max manufacturing,” he said..