Apple iPhone Production Suspension Crisis... Sales Growth Trend Likely to Break

[Asia Economy Reporter Yujin Cho] As COVID-19 cases surge in China, Apple's largest production hub, forecasts suggest that iPhone production disruptions will continue into the first half of next year. The China-originated COVID-19 crisis is spreading across all stages of the supply chain, including production, warehousing, logistics, and transportation, leading to projections that Apple’s revenue in the fourth quarter will break its recent growth trend and turn negative.

On the 25th (local time), major foreign media outlets cited economic experts' analyses reporting that Apple is facing a crisis of halted iPhone production due to the explosive increase in COVID-19 cases in China since October.

The Foxconn factory in Zhengzhou, Henan Province, China?Apple’s largest iPhone production base?has been put on high alert for iPhone production over the past two months due to a surge in confirmed cases, government lockdown policies, and protests over treatment conditions erupting simultaneously. In this situation, Chinese authorities’ repeated confusion, including withdrawing the 'zero COVID' policy without adequate preparation and concealing quarantine-related information, has raised concerns that iPhone production disruptions in China may face new challenges. Alan Day, chairman of State of Flux, a supply chain consulting firm based in London, warned, "Due to the Chinese authorities’ poor handling of COVID-19, Apple’s supply chain could face a critical moment in the next 2 to 6 months."

The iPhone production disruption is spreading beyond manufacturing to warehousing, logistics, transportation, and distribution sectors. Foreign media reported that most customers visiting Apple or electronics stores in major shopping districts in Beijing to buy the iPhone 14 series are turning away due to stock shortages and store closures. According to Swiss investment bank UBS, lead times have increased due to production disruptions, with estimated product wait times for iPhone 14 series buyers in the U.S. reaching at least 23 days. Securities firms predict that the product wait times could be longer than expected due to labor shortages across the entire supply chain.

[Image source=Reuters Yonhap News]

There are also concerns that Apple’s production disruptions will prolong into the first half of next year due to the all-encompassing crisis. As the China risk spreads, Apple has belatedly begun diversifying production bases to countries such as Vietnam and India, but production shares in these regions remain minimal.

Prolonged production disruptions are expected to lead to poor performance. There are forecasts that Apple’s revenue growth streak, which has continued for 14 consecutive quarters, may break in the fourth quarter of this year. According to market consensus, Apple’s Q4 revenue forecast is expected to decline compared to $123.9 billion in the same period last year, and net profit is also projected to drop by about 8%, resulting in disappointing results both in scale and substance. Securities firms expect iPhone shipments in Q4 to decrease by approximately 5 to 15 million units compared to targets.

The outlook for next year’s performance is also not optimistic. Horace Dediu, an analyst at Asymco, an information technology (IT) consulting firm, said, "Typically, during the COVID-19 pandemic, demand for products like the iPhone surged due to remote work and pent-up consumption, but the situation in China is expected to be different," adding that "with China’s population lacking herd immunity, consumer purchasing power is significantly contracting, making a performance downturn in the Chinese market next year inevitable." Currently, more than one-fifth of Apple’s total revenue comes from the Chinese market.

On Wall Street, Apple’s outlook has been lowered for the same reasons. On the 20th, JP Morgan reduced Apple’s target stock price from $200 to $190. JP Morgan analyst Sameek Chatterjee expressed concern, saying, "Lead times for iPhone products remain longer than before the Zhengzhou COVID-19 shutdown, and considering seasonal demand, supply shortages are expected to persist."

This content was produced with the assistance of AI translation services.