Tim Cook's trouble in China

Hey, this is Debby in Taipei. As Apple hosts WWDC, it’s facing mounting challenges in China. But first…The Bloomberg Technology Summit kicks [View in browser]( [Bloomberg]( Hey, this is Debby in Taipei. As Apple hosts WWDC, it’s facing mounting challenges in China. But first… The Bloomberg Technology Summit kicks off on Wednesday, featuring interviews with the CEOs of Amazon, Uber and more. You can [register here]( to attend in person in San Francisco, or to watch online. Today’s must-reads: • Amazon’s stock split [took effect Monday]( • The MacBook Air will get [an overhaul]( • US regulators [are investigating]( whether Binance broke securities rules The China contagion Apple Inc. is hosting its annual developers’ conference in California this week with [lots of fanfare](, but the company’s biggest dramas are unfolding on the other side of the world. In and around Shanghai, Apple has run into supply-chain bottlenecks and myriad other problems caused by severe Covid-19 lockdowns. Meanwhile, the Chinese market, a huge Apple growth center, has stumbled. Up until this month, supercharging sales in China has been one of Chief Executive Officer Tim Cook’s most important achievements. So has turning China into a gigantic [production base](bbg://news/stories/RB7FFHDWRGG0) that has helped cut costs. Now, though, Cook’s bet on centralized manufacturing looks increasingly risky. Apple’s travails in China were on display last month when violent clashes erupted at a supplier factory in Shanghai. Workers there [revolted]( after spending long periods isolated at the factory, when they were not allowed to leave as part of efforts to avoid Covid contamination. Apple [warned](bbg://news/stories/RB2LEFGJCD1G) in an earnings call that disruptions from ongoing chip shortages and China’s virus restrictions will cost the company as much as $8 billion in sales in the current quarter. My colleague Mark Gurman has [noted]( that China’s Covid Zero policy already affected shipments of MacBooks. US consumers now need to wait as long as two months if they are ordering a 14- or 16-inch MacBook Pro model. No wonder the updated MacBook Air computers announced on Monday won’t go on sale [until July](. The company has moved to reduce its dependency on China. Cook said in a recent investor call that Apple’s supply chain is “truly global.” Indeed, Apple is now making some iPhones in India and Brazil, and there are plans to [move]( some iPad and MacBook production to Vietnam. Still, the scale of those sites is dwarfed by the mammoth manufacturing empire that China hosts. Building localized supply chains is also not a task that can be accomplished in a hurry. It took Foxconn more than three decades to reach its current scale, aided by a comprehensive network of component makers that also expanded over time. No other country can muster the components necessary to recreate Foxconn’s iPhone assembly site in central China—which is able to accommodate several hundred thousand workers during the peak season. At the same time, China is [struggling]( to meet its official economic target for this year. Its markets are still reeling from its Covid Zero campaign, and the country’s cooling economy is expected to [dent]( global smartphone shipments this year. On the bright side for Apple, it’s faring slightly better than its Android rivals, keeping the iPhone production target in 2022 [little changed]( from last year. As more companies like Apple look to diversify their manufacturing and lessen their reliance on China, it’s possible that the country could eventually lose its crown as the world’s go-to supplier and most promising growth market. But getting there won’t be a pleasant process.—[Debby Wu](mailto:dwu278@bloomberg.net) The big story Elon Musk formally and forcefully revived his assertion that Twitter has a bot problem and [threatened to walk away]( from his deal to buy the company if the social network doesn’t do more to prove its users are real people. Meanwhile, the Texas attorney general said he [opened an investigation of Twitter]( over bot accounts. What else you need to know Peloton got a new CFO, as the company [strives for a turnaround](. Discord hired its first [lobbyists](. Citigroup plans to hire 4,000 [tech staff]( to tap into the “digital explosion.” Apple announced new iPadOS [keyboard shortcuts]( and pro features. Follow Us More from Bloomberg Dig gadgets or video games? [Sign up for Power On]( to get Apple scoops, consumer tech news and more in your inbox on Sundays. [Sign up for Game On]( to go deep inside the video game business, delivered on Fridays. Why not try both? 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