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Apple’s business is threatened by a widespread coronavirus outbreak in China, with chain experts warning of a months-long growing threat of a months-long disruption in iPhone production.
The US tech giant has had to deal with more than a month of chaos at the megafactory of its main assembler Foxconn in Zhengzhou, China, known as the “City of the iPhone”, following an outbreak of Covid-19 that began in October.
Foxconn has moved some of its production to other factories in China, while Apple has worked with component suppliers for unusually long wait times — about 23 days for consumers buying high-end iPhones. diversity in the United States, according to a study by the Swiss bank UBS.
As the Chinese government reverses its zero-covid policy, a longer-term threat now looms: a shortage of hard work in component factories or meeting plants across the country.
“We see a lot of operations impacted by absenteeism, not only in factories, but also in warehouses, distribution, logistics and transportation facilities,” said Bindiya Vakil, executive director of Resilinc, a California-based organization that traces more than 3 million parts back to origin. Source chain mapping services.
Apple warned on Nov. 6 of “significant” disruptions ahead of the holiday season. The irregularities came less than two weeks after executives forecast moderate sales growth during the crucial period around Christmas, below 8 percent.
The consensus among analysts is that the company’s profit this quarter will fall just below the record $123. 9 billion reached at the same time last year, with net profit expected to fall more than 8 percent, according to bank estimates compiled through Visible Alpha. 14-quarter earnings expansion series, as Apple reports a shortage of five to five million iPhones.
First, many analysts had raised their forecasts for the next six months, assuming that missed orders would be postponed rather than cancelled.
But threats to Apple’s profits for 2023 have increased, as models have shown that one million Chinese are at risk of dying from covid over the coming winter months after President Xi Jinping lifted strict pandemic controls. An Apple store in Beijing’s main grocery shopping district had to cut hours last week because all of its workers were sick.
One-fifth of Apple’s profit comes from sales in China, while more than 90% of iPhones are assembled there. Smartphone rival Samsung exited China in 2019 and has diversified its presence in at least 4 countries.
Horace Dediu, an independent analyst at Asymco, a consulting firm, said disruptions in Apple’s production and operations in recent months may be followed by a call for crisis in China as consumers redefine their spending habits.
“Although the rest of the world saw a call to increase closures, this was due to the flight from home and the relaunch,” Dediu said. “With low immunity and minimal safety nets, Chinese consumers can simply hide and avoid big purchases next year. “
Apple’s largest Taiwanese suppliers, plus Foxconn, Pegatron and Wistron, have responded to expand their fledgling Indian operations.
Prabhu Ram, head of CyberMedia Research’s business intelligence organization in Gurgaon, India, estimated that more than 7 or 8 iPhones are assembled in India and predicted that the big 3 Taiwanese suppliers are targeting 18 iPhones assembled in India by 2024.
China’s attempt to eliminate the disease rather than manage it has left the country’s meeting lines exposed, said Alan Day, president of State of Flux, a London-based supply chain consultancy that has been working with the UN on corporate criteria to respond to covid outbreaks.
“The next two to six months will be a watershed moment for Apple’s supply chain, due to China’s immaturity in dealing with Covid,” Day said. “The rest of the world has developed standards, but China has been almost nonexistent in getting corporations to adopt those standards. “
Additional information via Ryan McMorrow in Beijing.
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