Due to Beijing's surprise U-turn on COVID regulations, China's tech supply chain is facing the dual issues of declining demand and personnel upheaval as the new year begins.
Because of weaker demand, Apple has informed numerous suppliers to produce less parts for AirPods, the Apple Watch, and MacBooks in the first quarter, according to Nikkei Asia.
Apple Is Looking Out For Its 2023 Q1 Situation
Early in December, China began to roll back the strictest COVID program in the world, which included mass testing and quarantines, in an effort to revive the economy.
After lobbying for years to keep operations under the stringent COVID regulations, IT manufacturers initially welcomed the change of heart.
However, they now have to contend with accepting a new normal characterized by escalating illnesses and laxer regulations.
It can be remembered that the Cupertino giant reported $11.51 billion in Mac revenue for the fourth quarter of 2017, an increase of about 26% from the previous quarter.
Meanwhile, Apple Watch sales alone accounted for $41 billion in wearable income, while iPad sales fell 13% year over year to $7.17 billion, Mac Rumors writes.
It is important to note that over the past few months, Apple has encountered difficult supply chain obstacles that have mostly affected the development of the iPhone 14 Pro.
Because of that, China's supply chain is still adjusting to the most recent dramatic regulatory changes, which resulted in labor scarcity due to the rapid COVID increases.
Early in December, China relaxed several COVID-19 limitations in response to widespread protests against the country's stringent lockdown policies.
According to Benzinga, stocks in China rose after the news, but the nation is now working to control increasing infection rates.
Despite this, a hint that normal iPhone manufacturing has returned is the fact that Apple's primary iPhone plant in China has resumed operation at close to peak capacity.
Read More: Apple's Stock Suffers An 18-Month Low Following iPhone 14 Pro's Supply Setback
Economists Weigh In On The Impacts Of The COVID-19 Resurgence In China
"The rapid surge of infections in big cities might be only the beginning of a massive wave of COVID infections," Ting Lu, Nomura's chief China economist, warns the industry.
With that, tech companies are told that they should expect major activity indices to remain weak, and even decrease even more in the future.
However, economist Alicia Garcia Herrero claims that the noticeable impact of the COVID-19 resurgence in China might not last long as production is expected to peak at Chinese New Year.
According to experts, because orders decline toward the end of the year, there is actually little effect on the overall order fulfillment, Nikkei Asia reports.
Because of that, manufacturers are not worried about the possible implications of the lack of demand for production come 2023 since the situation reportedly occurs all the time.
Despite the bleak market outlook, technology manufacturers are hesitant to reduce workforce at this time out of concern that they will encounter the same difficulties as they had in 2022.
Related Article: Apple Faces iPhone Production Disruption In 2023 As COVID-19 Resurfaces In China
