Apple warns iPhone production disrupted by China Covid-19 restrictions

Apple warns iPhone production disrupted by China Covid-19 restrictions


The company’s high-end iPhone 14 Pro and Pro Max models are being affected by reduced production capacity

Apple Inc. warned shipments of its high-end iPhone models would be hindered amid Covid-19 restrictions at one of its major suppliers in China, an inopportune disruption as the company enters its all-important holiday shopping season.

The Cupertino, Calif., tech giant on Sunday said the assembly factory in Zhengzhou is currently operating but at reduced capacity.

“We now expect lower iPhone 14 Pro and iPhone 14 Pro Max shipments than we previously anticipated and customers will experience longer wait times to receive their new products,” the company said.

Last week, Apple-supplier Foxconn Technology Group entered a weeklong lockdown at its Zhengzhou complex after battling a Covid-19 outbreak that lasted several weeks. The facility, known as iPhone City, is the world’s biggest assembly site for Apple’s smartphones and home to hundreds of thousands of workers.

Foxconn attempted to create a closed-loop system to stop the spread of Covid-19, largely shutting off huge numbers of workers from the outside world and confining them to their homes and specific parts of the factory. Some refused to return to the factory, worried about the spread of the disease. Some workers escaped from the site.

The Zhengzhou facility would normally produce more than 80% of the iPhone 14 base models and 85% of the high-end Pro models, according to Counterpoint Research.

On Sunday, Apple said it continued to see strong demand for the high-end iPhones, and that it was giving priority to the health and safety of the workers in its supply chain. “We are working closely with our supplier to return to normal production levels while ensuring the health and safety of every worker,” Apple said.

Foxconn said it is working with the government “in concerted efforts to stamp out the pandemic and resume production to its full capacity as quickly as possible.” Starting Monday, Foxconn is moving all its workers who can still work into three dormitory areas and limiting their movements between those dorms and factories, according to a post on its WeChat social-media account.

Foxconn also revised down its October-December forecast due to the Covid-19 outbreak at Zhengzhou, the company said in its monthly revenue report released Monday. Earlier, Foxconn said it had been cautiously optimistic about the fourth quarter.

The disruption could rank as the biggest Covid-era blow yet to Apple, which has been mostly able to navigate around the kinds of punishing supply-chain disruptions that have crippled rivals and other industries.

The iPhone company has churned out record profits due to iPhone sales during the past two years, helping fuel investor enthusiasm and pushing the company’s stock to new highs, though those gains have retreated in recent months.

Still, Apple has remained a rare bright spot among tech companies and its pricey phones have proved largely resilient to a broader smartphone market slowdown.

The company’s stock closed Friday at $138.38 a share, down about 24% since the start of the year. Other tech stocks have suffered steeper declines this year, such as Meta Platforms Inc., which is down more than 70% in the same period.

Less than two weeks ago, the company reported record revenue growth for the quarter that ended in September and said it expects year-over-year sales growth would continue in the October-through December period. The so-called fiscal-first quarter is traditionally Apple’s biggest and most important as it benefits from holiday shoppers gobbling up the latest iPhones and other gadgets.

Apple has benefited from buyers gravitating to its most expensive iPhone Pro models, pushing the average selling prices to new records, with some models costing over $1,000. The sales have been helped in part by generous incentives offered by U.S. cellular phone carriers eager to lock in customers as part of an upgrade cycle to iPhones with 5G cellular connectivity.

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Author: Shirley