Can Apple’s ops team handle this new crisis?

In Greek mythology, Zeus . punished Sisyphus for cheating death by forcing him to roll a huge boulder up the mountain forever. I suspect Apple’s operations teams feel the same way. Not only did they have to adapt to the pandemic, but they also had to soften the effect of the Russian invasion of Ukraine and must now do what they can to save business as the situation in Taiwan expiresthat could pose an existential threat to the company and its operations.

The incredible uphill journey

It’s not just Apple, of course, the entire tech industry is under threat from tensions between Taiwan and China. Apple Silicon chips used throughout the product range are made by Taiwan’s own TSMC. TSMC chairman Mark Liu recently warned that further tensions in Taiwan would cause major problems.

Liu also noted the sophistication of the engineering industry’s supply chain, tell CNN“Because this is such an advanced manufacturing facility, it relies on a real-time connection to the outside world, to Europe, to Japan, to the US, from materials to chemicals to spare parts to engineering software and diagnostics.”

When it comes to manufacturing, China’s importance to Apple’s supply chain only really became apparent when COVID-related lockdowns meant Apple couldn’t make enough Macs or iPads to meet demand. In that context, it seems counterintuitive that Apple told corporate employees this week that they no longer need to wear masks to protect against COVID-19.

A risk for assumptions?

I imagine the operations teams take heart that their ability to manage and run Apple’s business in challenging market conditions still allowed the company to deliver record results in the last quarter and anticipate growth in the quarter of 2005. September. Still, Apple CFO Luca Maestri may have been more realistic than he’d hoped when he warned:

“Given the ongoing near-term uncertainty around the world, we are not providing a revenue forecast, but we are sharing some guiding insights based on the assumption that the macroeconomic outlook and COVID-related effects on our business do not deteriorate from what we are project today for the current quarter.”

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

Can we diversify fast enough?

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

TSMC is expected to open a $12 billion Apple Silicon manufacturing facility in Arizonawith help under the finally passed Chips and Science Law. But even this won’t be operational for a year. In most cases, Apple (and anyone but Apple) is not yet able to diversify production outside of China, even if there were enough programmers and engineers in those markets to man these machines.

Still, the huge demand for Apple’s products means that even if factories in India, Vietnam and (perhaps) Brazil and Mexico turn on the lights, they still can’t scale to meet all that demand. (Pegatron’s newest factory in Mexico won’t be online until the end 2023according to local media reports.)

This is of particular importance as Apple is reportedly gearing up to launch what will likely be its next “pillar” product, AR Glasses, next year. It’s fair to think that if those products appear, Apple will still be dependent on production from that entire region, adding even more of a headache to that hard-working operations team.

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Copyright © 2022 IDG Communications, Inc.

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