Shortages were already occurring in Apple's supply chain, and the huge demand meant even higher production rates at some suppliers' factories. Some unconfirmed reports suggested that Foxconn's attempt to boost production by extending overtime and moving people from one location to another were significant factors contributing to the unrest and brief factory shutdown.

This issue has been percolating for quite some time, and it will require a reexamination by Apple - and plenty of other multinationals with Chinese production - of their overall supply-chain strategies. The fundamental flaw in U.S. companies' current approach to Chinese partners seems to be a lack of understanding of "cost arbitrage," the core of the strategy and the raison d'etre for being in China in the first place.

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Keywords: international trade, sourcing solutions, logistics management, IT supply chain, supply chain management, Foxconn riots, Apple China operations