Amid Donald Trump proposes to impose additional tariffs on Chinese imports, Apple Inc. (NASDAQ:AAPL) is looking to double the production capacity of Airpods Pro to meet the growing demand. The company entered a deal with Luxshare-ICT, a Chinese manufacturer, to ramp up the production of its popular Airpods pro and Airpods to two million a month. Apple also requested another manufacturer -GoerTek, in China to increase the production of Airpods at a production facility in Vietnam.
Healthy demand for Apple Airpods
Apple maintains a healthy order book of around 2 million for its latest Airpods Pro. The company has selected Luxshare-ICT over traditional suppliers such as Quanta Computers, Inventec, and Foxconn to increase production and meet the demand before the deadline quickly. It could also create losing opportunities for other suppliers. However, Apple may face additional tariffs on Chinese manufactured Airpods because of the ongoing trade war between the US and China.
Apple lobbies with Washington
Apple is lobbying with Washington to provide relief for the Airpods produced in China. The companies in China are more aggressive compared to the Japanese or Taiwanese peers when it comes to diversification of production from China to counter the tariffs imposed by the US. Luxshare-ICT’s team is young, vibrant, and moves faster. However, young guys are not combative like wolves to quickly adapt to the changing technology. Luxshare-ICT has received orders from Apple to assemble watches. Chief Executive Officer of Apple, Tim Cook, praised the efforts of Luxshare-ICT to achieve success. Apple relies more on Vietnam facilities to prevent US tariffs imposition on its equipment sourced from China.
Chinese suppliers accounted for 41% of the top 200 suppliers of Apple in 2018. Apple generates a major chunk of its revenues from wireless earbuds. It has introduced the latest version of Airpods on October 31, 2019. The features of the latest Apple Airpods, which are priced at $249, include noise cancellation, and water resistance.
The customers have to wait for up to 30 days to receive the latest Airpods. Apple initially introduced the basis version of Airpods in 2016 at $159. The company reported a year-on-year increase of 54% in its Q4 earnings ($6.52 billion), mainly from home, wearables, and accessories.