The Supply Chain Matters blog provides our latest news capsule format follow-up relative to the updating of prior supply chain management developments we have shared with readers.
Included in this update is a report indicating further adjustments in Apple iPhone 14 planned production volumes, reporting that the major U.S. West Coast Port backups earlier this year are now ended, and a report indicating that global automakers have increased their investment levels in EV supply and production needs to an estimated $1.2 Trillion by 2030.
Report Indicates Apple iPhone14 Plus Production Has Been Cut
After commencing volume production of the newly announced Apple iPhone 14 family of smartphones, business broadcasting network CNBC, citing original reporting from The Information (Paid subscription or metered view), reported last week that one of Apple’s manufacturers in China was instructed to immediately halt production of a component of the Plus model.
The Information report specifically indicates: “Apple has told at least one manufacturer in China to immediately halt production of iPhone 14 Plus components while its procurement team reevaluates demand for the product, which Apple has positioned as a cheaper alternative to its more expensive iPhone Pro models but equipped with a large screen, according to one of the people.” The report further indicates that two downstream suppliers in China that rely on the parts and assemble them into larger modules are also cutting their production 70 percent and 90 percent, respectively.
In a late September posting, Supply Chain Matters highlighted a Bloomberg published report indicating that Apple as backing off prior plans to increase planned production of the new iPhone14. Suppliers were reportedly told to pull back from initial plans to produce 96 million phones in the second half of this year. Rather, the plan seems to be the production of 90 million iPhone14 units which was in-line with Apple’s original forecast this summer.
Today, a published Reuters report, citing data from market research firm TrendData, indicates that the production cutback of the iPhone 14 Plus and the increase in output of the more expensive iPhone 14 Pro was due to lukewarm demand for the mid-range model. Reportedly, the share of more expensive iPhone 14 Pro series has increased to 60 percent of the total output from the initially planned 50 percent, and it could rise to 65 percent in the future, according to the market research data.
Apple did not immediately respond to a Reuters’ request for comment.
These demand and supply adjustments are very typical for companies with responsive sales and operations planning processes, including Apple. Each year there are reports of when Apple makes iPhone production adjustments, and this year is no difference. The real story is how accurate and responsive such adjustments turn out to be in quarterly and annual business performance.
U.S. West Coast Container Ship Backup Has Ended
In our Supply Chain Matters news capsule of September 27, we pointed out that business, supply chain and transportation media had reported this that the cost of shipping a container of goods from China to the U.S. West Coast had declined to the lowest level in more than two years. Whereas the spot rate to ship a container from China to the U.S. spiked above $20,000 at its highest point in 2021, the spot rate dropped below $4,000 per 40-foot container.
Corresponding signs that there will likely be no traditional peak shipping season this year were reinforced by a Bloomberg published report declaring that these trends spell the end of the shipping boom.
The Wall Street Journal Logistics Report indicated late last week that: “the backup of container ships off the Southern California coast that was at the heart of the U.S. supply chain congestion during the Covid-19 pandemic has effectively disappeared.” Reportedly, the queue of container vessels waiting to unload at the Ports of Los Angeles and Long Beach was just four vessels last week, compared to over 100 ships in January. Instead, import volumes to the U.S. are on the decline because many retailers and wholesalers elected to move holiday focused goods earlier in the year.
Another contributing factor was the continued ongoing labor contract negotiations among various dockworkers and U.S. West Coast port operators. It is becoming clearer that supply chain procurement and logistics teams elected to route import shipments thru either U.S. Gulf or East Coast ports of entry. Import volume for Los Angeles and Long Beach ports reportedly declined 18 percent in September, the lowest level since September 2020. Similarly, August imports reportedly decline 12 percent from prior year levels.
Similarly, WSJ separately reported that trucking freight operators now indicate that the traditional peak shipping season is crumbling as overstocked retailers cancel any new inventory orders. With freight operators expected to report Q3 quarterly financial performance, equity markets are keen to ascertain the impact to carrier capacity levels and profitability.
Report Indicating Global Automakers to Double Investments on EV Supply Networks
Supply Chain Matters has featured series of postings highlighting the significant investment efforts from individual global auto makers in building out their EV model vehicle supply and production networks, amounting to billions in investments.
A published and noted exclusive Reuters report (Paid subscription or metered view) quantifies that based on an analysis of public data and projections released by auto makers, the industry is on-track to double spending on product development and supply networks, including batteries, to a level of $1.2 Trillion by 2030. Reportedly this number is twice an estimate published a year ago.
In one reported dimension, cited from sourced industry forecasting data, automakers and their battery suppliers are planning to install 5.8 terawatt-hours of battery production capacity in this same time period. Tesla alone has reportedly declared audacious plans to be able to build and sell 20 million EV’s in 2030, a 13-fold increase over this year estimates.
Separately, other industry dialogue and media reporting indicates that concerns remain as to whether there is near enough adequate supply of critical metals and ores globally to support these levels of output production. A lot of work remains over the next seven years, but the sheer number of investments planned would indicate that automakers are betting their future growth and profitability in an overall transformation from fossil-fuel to EV powered vehicles.
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