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Apple’s business has been threatened by the coronavirus outbreak in China, with supply chain experts warning that there is an increasing risk of iPhone production being disrupted for months.
The US giant has struggled with more than a month of chaos at Foxconn’s main assembly plant in Zhengzhou, China, following the outbreak of the Covid-19 outbreak that began in October.
Foxconn will move some production to other factories across China, while Apple has worked with component suppliers to ease unusually long wait times — around 23 days for customers buying high-end iPhones in the U.S., according to a study by Swiss bank UBS.
As the Chinese government reverses its zero-covid policy, there is now a lingering threat looming: possible labor shortages in factories or assembly plants across the country.
“We’re going to see more jobs affected by absenteeism, not just in factories, but in warehousing, distribution, logistics and transportation,” said Bindia Vakil, CEO of California-based Resilink Group. 3 million entities to provide supply chain mapping services.
Apple warned of “significant” disruption ahead of the holiday season on November 6. The unusual announcement came less than two weeks after executives beat sales growth in the critical period around Christmas below forecasts of 8 percent.
The consensus among analysts is that the company’s revenue this quarter will fall below the $123.9 billion reported in the same period last year, and net profit could fall more than 8 percent, according to bank estimates compiled by Visible Alpha. This would break 14 quarters of revenue growth as Apple faced a shortfall of between 5 million and 15 million iPhones.
Many analysts initially lifted forecasts for the next six months, assuming that backlogs would be postponed rather than canceled.
But concerns have risen for Apple’s earnings in 2023, with modeling suggesting 1 million Chinese are at risk of dying from Covid-19 in the coming winter months after President Xi Jinping eased stricter epidemic controls. An Apple store in Beijing’s main shopping district had to cut hours last week because all its employees were sick.
A fifth of Apple’s revenue comes from sales in China, where more than 90 percent of iPhones are assembled. Smartphone rival Samsung in 2010 In 2019, he left China and held various meetings in at least four countries.
Horace DeDieu, an independent analyst at consulting firm Asimco, said Apple’s production and operational problems could be followed by a demand crisis in China in the coming months, as consumers recalibrate their spending habits.
“While the rest of the world has seen an increase in demand during the lockdown, it is due to work-from-home and stimulus,” Dediu said. With low immunity and small safety nets, Chinese consumers can hunt and avoid big purchases next year.
Apple’s most important Taiwanese suppliers, including Foxconn, Pegatron and Wistro, have responded by looking to expand their Indian operations.
Prabhu Ram, head of the Industry Intelligence Group at Cyber Media Research in Gurgaon, India, estimates that 7-8 percent of iPhones are being assembled in India, and the three Taiwanese suppliers predict that 18 percent of iPhone assembly will be in India. In the year 2024
China’s attempt to eradicate rather than control the disease has exposed the country’s assembly lines, said Alan Day, chairman of Flux State in London, which has been working with the United Nations on corporate standards for the response to Covid. Epidemics.
“The next two to six months will be a critical period for Apple’s supply chain because of China’s lack of maturity to manage Covid,” Day said. “The rest of the world has set standards, but China has been almost non-existent in getting companies to adopt those standards.”
Additional reporting by Ryan McMorrow in Beijing.
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