(Stock, adds details of Foxconn’s new COVID-19 measures)
Apple expects iPhone 14 Pro and Pro Max shipments to drop
Apple announces drastic reduction in production capacity at China factories
Apple supplier Foxconn cuts fourth-quarter outlook
Ben Blanchard and Jaibeer Shekhawat
TAIPEI (Reuters) – Apple Inc shipped 14 high-end iPhone models lower than previously expected after a virus-hit Chinese factory cut production sharply expects a weaker sales outlook for the year-end holiday season.
Strong demand for the new iPhones has allowed Apple to remain a rare bright spot in the global tech sector, which has been hit by sharp inflation and interest rate cuts.
But the Cupertino, Calif.-based company is now falling victim to China’s strict zero COVID-19 policy. This has prompted many global companies, including Ester Lauder Companies Inc and Canada Goose Holdings Inc, to close stores in China and cut back for the full year. predict.
“The facility is currently operating at significantly reduced capacity,” Apple said in a statement on Sunday, without elaborating on the impact on production.
“We continue to see strong demand for the iPhone 14 Pro and iPhone 14 Pro Max models. However, we now expect iPhone 14 Pro and iPhone 14 Pro Max shipments to be lower than previously expected.”
Reuters reported last month that China’s tightening measures to combat the novel coronavirus could cause Apple’s iPhone production to drop by as much as 30% in November at the world’s largest factory.
The main Zhengzhou factory in central China, which employs about 200,000 people, has been rocked by frustration with draconian measures to curb the spread of COVID-19, with many workers fleeing the site.
Market research firm TrendForce said last week that it had lowered its forecast for iPhone shipments in the December quarter by two to three million units, down from an earlier estimate of 80 million units, due to troubles at its Zhengzhou factory. Currently, the utilization rate was about 70%.
Apple, which began selling its new iPhones in September, says customers will have to wait longer to receive their new products.
The world’s most valuable companies, with a market capitalization of $2.2 trillion, are expected to see revenue growth of less than 8% in the December quarter, according to October forecasts.
“Anything that affects Apple’s production will obviously affect the stock,” said Quincy Crosby, chief global strategist at LPL Financial in Charlotte, North Carolina.
“But this is part of the deeper story, the uncertainty surrounding the future of the Chinese economy..The measures will be lifted in the first quarter.”
China reported its highest number of new COVID-19 infections in six months on Sunday after health officials said they were sticking to strict containment of the coronavirus.
FOXCONN CUT OUTLOOK
Taiwan’s Foxconn, the operator of the Zhengzhou plant, said on Monday it was working to resume full production at the plant as soon as possible, lowering its outlook for the fourth quarter.
It said the factory will implement new measures to limit the spread of COVID-19, including a system to limit movement between employee dormitories and factory areas.
Foxconn shares fell 0.5% in early trading on Monday, trailing the broader index’s 1.2% gain.
China ordered an industrial park housing iPhone factories to begin a seven-day lockdown on Wednesday. The move is a move to increase pressure on Apple’s suppliers, who are desperate to assuage workers’ grievances at the base.
Central China’s Zhengzhou Airport Economic Zone said it would immediately implement “silent management” measures, including curbing all residents and allowing only approved vehicles on roads within the region.
Foxconn, the world’s largest contract electronics manufacturer, said in a statement that the Henan provincial government, where Zhengzhou is located, “as usual, made it clear that it will fully support Foxconn in Henan.”
“Foxconn is now working with the government to eradicate the pandemic and resume production at full capacity as soon as possible.”
Foxconn, formerly known as Hon Hai Precision Industry Co Ltd, is Apple’s largest iPhone maker, accounting for 70% of global iPhone shipments. We also have smaller production bases in India and Southern China.
Foxconn, which had previously shown “cautious optimism” for the fourth quarter, said it was “downgrading” its outlook given the events in Zhengzhou.
The fourth quarter is traditionally a hot season as Taiwanese tech companies compete to supply mobile phones, tablets and other electronic devices for the holiday season in western markets.
Foxconn will announce its third quarter earnings on November 10th.