Daily Management Review

Schedule Of iPhone Development Of Apple Upended By Lockdowns In China


Schedule Of iPhone Development Of Apple Upended By Lockdowns In China
According to Nikkei Asia, development of at least one of Apple's new flagship iPhones for this year has slipped behind schedule due to disruptions caused by China's month-long COVID lockdowns.
According to many individuals with firsthand knowledge of the situation, Apple has urged suppliers to speed up product development efforts to make up for the lost time, which, in the worst-case scenario, might affect the manufacturing timeline and initial production volumes of the new phones.
Lockdowns in and around Shanghai began in late March as part of China's rigorous zero-COVID policy, and despite the relaxation of restrictions, the impact on supply chains has remained.
"It is challenging to make up for the lost time. ... Apple and its suppliers are working around the clock to speed up development," said an executive with an Apple supplier, adding that the pace of reopening in Shanghai is "rather slow."
Apple has already stated that the Chinese lockdowns have hampered the production of current models and might cost the company up to $8 billion in revenue this quarter.
This year, Apple is planning four new iPhone models, provisionally dubbed the iPhone 14, 14 Pro, 14 Max, and 14 Pro Max. The iPhone 14 and Pro models will have 6.1-inch displays, while the iPhone Max and Pro Max models will have 6.7-inch displays. Last July, Nikkei Asia reported that Apple would phase out the 5.4-inch iPhone mini range this year.
Foxconn and Pegatron, two of the most important iPhone assemblers, are in charge of a process known as new product introduction, or NPI. Apple and its suppliers sketch out the manufacturing method for turning their latest concepts into mass-market items during this stage. From approximately the end of August each year, NPI is followed by a series of verification processes carried out on a tight timeline to meet Apple's targeted timing for mass production.
Although Luxshare Precision Industry is not responsible for the NPI of new iPhones, Nikkei Asia has discovered that it has obtained orders to make two of the four models this year.
Due to COVID lockdowns, Pegatron's iPhone assembly plants in Shanghai and Kunshan — the company's key centre for Apple-related operations — had to go on sabbatical for weeks. On May 16, the Shanghai plant was given authorization to reopen under closed-loop management.
Apple had thought that development of the new iPhones would go easily this year, given that the COVID situation in China appeared to be under control and that suppliers were accustomed to working in the face of stringent coronavirus preventive measures.
The tech company was caught off guard when severe confinement restrictions were imposed following a sprinkling of verified cases across the country, followed by monthlong lockdowns in Apple's most crucial electronics clusters, according to the sources.
According to individuals briefed on the topic, the four new phones are currently in the engineering verification test, or EVT, stage of development. Suppliers develop the mechanical parts and manufacturing flow for the new iPhones at this stage, as well as create bills of materials (BOM) to estimate manufacturing costs. However, due to the Shanghai lockdowns, one of the models is around three weeks behind schedule. On May 17, China's largest metropolis officially announced that it had achieved "zero COVID" status. Shanghai took six weeks to get there.
By the end of June, all new iPhone models should have completed the EVT and moved on to the verification step. By the end of August or the first week of September, everything should be ready for mass production.
"If the development process can be sped up and proceed to the next level around the end of June or beginning of July, then it should still be possible to meet the mass production deadline of early September," another person familiar with the matter said. "But it really depends on whether the process can accelerate soon."
Isaiah Research analyst Eddie Han told Nikkei Asia that existing restrictions are a roadblock to getting development back on track.
"The resumption of production is not progressing well because there are still a lot of restrictions in terms of living and travel in the greater Shanghai area, even if these production sites can operate in a closed-loop," Han said. "Currently, we don't think the delay would immediately affect the schedule for the product launch, but we need to monitor closely whether there are some hidden and longer-term impacts."