Apple warns of COVID disruption of iPhone supplies from China


  • Apple expects lower supply of iPhone 14 Pro and Pro Max
  • Apple said its Chinese factory was operating at severely reduced capacity
  • Apple supplier Foxconn lowers fourth quarter forecast

TAIPEI, Nov 7 (Reuters) – Apple Inc ( AAPL.O ) expects lower-than-expected shipments after it cut its sales forecast for the year for its high-end iPhone 14 models following a significant production cut at a virus-hit plant in China. ends the holiday season.

Strong demand for the new iPhones has helped Apple remain a rare bright spot in the global tech sector, which has faced cost cuts due to rising inflation and interest rates.

But the Cupertino, Calif.-based company has fallen victim to China’s strict zero-Covid-19 policy, which has now riled many global firms including Estee Lauder Companies Inc ( EL.N ) and Canada Goose Holdings Inc ( GOOS.TO ). closing its stores in China and cutting full-year forecasts.

“The facility is currently operating at significantly reduced capacity,” Apple said in a statement on Sunday, without saying how much production was affected.

“We continue to see strong demand for the iPhone 14 Pro and iPhone 14 Pro Max models. However, we now expect iPhone 14 Pro and iPhone 14 Pro Max supply to be lower than we previously expected,” he said.

Last month, Reuters reported that production of Apple’s iPhones could be cut by up to 30% at one of the world’s largest factories in November due to tightening of COVID-19 restrictions in China.

The main Zhengzhou plant in central China, which employs about 200,000 workers, has been rocked by protests over strict measures to contain the spread of COVID-19, with many workers fleeing the area.

Market research firm TrendForce said last week that it had cut its iPhone shipment forecast for the December quarter by 2-3 million units from a previous 80 million due to problems at the Zhengzhou factory, adding that its case study showed factory capacity utilization rates were now around 70%.

Apple, which began selling new iPhones in September, said customers will experience longer wait times to receive their new products.

The world’s most valuable company, with a market capitalization of $2.2 trillion in October, forecast revenue growth to fall below 8% in the December quarter.

“Anything that affects Apple’s production obviously affects their stock price,” said Quincy Krosby, chief global strategist at LPL Financial in Charlotte, North Carolina.

“But it’s part of a deeper story — uncertainty about the future of China’s economy… These headlines are part of an ongoing saga over whether there is any truth to persistent rumors that authorities are debating whether or not some economic conditions are in place. the measures will be lifted in the first quarter.”

China on Sunday reported its highest number of new COVID-19 infections in six months, a day after health officials said they were sticking to strict coronavirus restrictions, likely dashing hopes of a recent easing by investors.

FOXCONN SHORTS THE VIEW

Taiwan’s Foxconn ( 2317.TW ), the operator of the Zhengzhou factory, said on Monday it was working to restore full production at the plant as soon as possible and lowered its forecast for the fourth quarter.

He said he would implement new measures to prevent the spread of COVID-19 at the plant, including a system restricting the travel of working workers between the dormitory and the factory area.

The plant also launched a recruitment drive on Monday, offering workers who left the plant between October 10 and November 5 a one-time bonus of 500 yuan ($69) if they want to return. It also announced a wage of 30 yuan an hour, higher than the base salary of 17 to 23 yuan an hour some workers told Reuters.

Foxconn shares were down 0.5% in early trade Monday, lagging behind a 1.2% gain in the broader index ( .TWII ).

The Zhengzhou Airport Economic Zone, home to the iPhone factory, went into a seven-day lockdown on Wednesday, banning all residents from going out and allowing only approved vehicles on the roads in the area. read more

Foxconn, the world’s largest contract electronics manufacturer, said in a statement that the government of Henan province, where Zhengzhou is located, “as always, will fully support Foxconn in Henan.”

“Foxconn is now working with the government to contain the pandemic and restore production to full capacity as soon as possible.”

Foxconn, formally Hon Hai Precision Industry Co Ltd, is Apple’s largest iPhone manufacturer, accounting for 70% of iPhone shipments worldwide. There are other small production sites in India and southern China.

Foxconn, which had previously guided for “cautious optimism” in the fourth quarter, said it would “downgrade” its outlook in light of the events in Zhengzhou.

The fourth quarter is traditionally a hot season for Taiwanese tech companies as they race to supply cellphones, tablets and other electronics for the year-end holiday period in Western markets.

Foxconn announced its third quarter profit on November 10. It declined to comment further on how the latest restrictions would be implemented at its factory.

($1 = 7.2135 Chinese Yuan Renminbi)

Reporting by Ben Blanchard in Taipei, Caroline Valetkiewicz in New York and Jaiveer Shekhawat in Bengaluru; Additional reporting by Brenda Goh; Written by Miyoung Kim; Edited by Daniel Wallis and Christopher Cushing

Our standards: Thomson Reuters Trust Principles.



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