Apple’s Business Under Threat

Apple’s business is under threat from a widespread coronavirus outbreak in China, with supply chain experts warning of a growing risk of months-long disruption to the production of iPhones.

The US tech giant has had to contend with more than a month of chaos at its main assembler Foxconn’s megafactory in Zhengzhou, China, known as “iPhone City,” following a Covid-19 outbreak that started in October.

Foxconn has moved some of its production to other factories across China, while Apple has worked with components suppliers to alleviate unusually long wait times — about 23 days for customers buying high-end iPhones in the US, according to research by Swiss bank UBS.

As the Chinese government reverses its zero-Covid-19 policy, a longer-lasting risk now looms: the potential of worker shortages at component plants or assembly factories across the country.

“We should be seeing a lot of operations get impacted by absenteeism, not just at factories, but warehouse, distribution, logistic and transportation facilities as well,” said Bindiya Vakil, chief executive of Resilinc, a California-based group that tracks more than 3 million components to provide supply chain mapping services.  Apple warned on November 6 of “significant” disruption ahead of the holiday season.

The rare statement came less than two weeks after executives forecast subdued sales growth in the crucial period around Christmas, of below 8 percent.

The consensus among analysts is that company revenues this quarter will fall just below the record US$123,9 billion it achieved over the same period last year, with net profits projected to tumble more than 8 percent.

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