Apple warns of impact on iPhone shipments from China due to COVID interruptions

Apple warns of impact on iPhone shipments from China due to COVID interruptions

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TAIPEI — Apple Inc on Sunday expected lower shipments of higher-end iPhone 14 models than previously forecast, hit by a major production cut at a major plant in China hit by COVID-19 restrictions.

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

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

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Reuters reported last month that production of Apple’s iPhones could drop as much as 30% at one of the world’s largest factories in November due to tightening of COVID-19 restrictions in China.

Its main Zhengzhou plant in central China, which employs around 200,000 people, has been rocked by discontent over strict measures to curb the spread of COVID-19, with many workers fleeing the site.

Market research firm TrendForce said last week that it lowered its iPhone shipment forecast for the December quarter by 2-3 million units, from 80 million previously, due to problems at the Zhengzhou plant, adding that his investigation of the situation found that the factory’s capacity utilization rates were now around 70%.

Apple, which launched sales of the new iPhones in September, said customers will experience longer wait times to receive their new products.

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

“But this is part of a much deeper story: the uncertainty surrounding the future of the Chinese economy…These headlines are part of the ongoing saga as to whether there is any truth to the constant rumors that authorities are discussing whether some of the measures will be implemented. get up 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 would stick with tight coronavirus restrictions, likely dashing investors’ recent hopes for an easing. .

FOXCONN CUT OUTLOOK

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Taiwan’s Foxconn, the operator of the Zhengzhou factory, said on Monday it was working to resume full production at the plant as soon as possible and revised down its outlook for the fourth quarter.

He said he would implement new measures at the plant to slow the spread of COVID-19, including a system that restricts the movement of factory workers.

China on Wednesday ordered an industrial park that houses the iPhone factory to go into a seven-day lockdown, in a move meant to intensify pressure on Apple’s supplier as it struggles to quell worker discontent at the base.

Central China’s Zhengzhou Airport Economic Zone said it would impose “quiet management” measures with immediate effect, including banning all residents from leaving and allowing only approved vehicles on roads within that area.

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Foxconn, the world’s largest contract electronics maker, said in a statement that the provincial government of Henan, where Zhengzhou is located, “has made it clear that, as always, it will fully support Foxconn in Henan.”

“Foxconn is now working with the government in a concerted effort to eradicate the pandemic and resume production at full capacity as quickly as possible.”

Foxconn, formally Hon Hai Precision Industry Co Ltd, is Apple’s largest iPhone maker, accounting for 70% of global iPhone shipments. It has other smaller production sites in India and southern China.

Having previously guided “cautious optimism” in the fourth quarter, Foxconn said it will “revise downward” its outlook given the events in Zhengzhou.

The fourth quarter is traditionally peak season for Taiwanese tech companies as they scramble to supply mobile phones, tablets and other electronics for the year-end holiday period in Western markets.

Foxconn releases third-quarter earnings on November 10. (Reporting by Ben Blanchard; Editing by Daniel Wallis and Christopher Cushing)

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