The widespread spread of the Coronavirus poses a significant risk to Apple’s operations in China. If the supply chain is disrupted again like it was the last time, experts say it could take months, if not years, to get back to normal.
Increasing reports of COVID in China have cast doubt on Apple’s 2023 earnings forecast. Therefore, Apple has requested that its contract manufacturers Foxconn, Pegatron, and Wistron increase output in India. Source of Image: AFP
A major setback for Apple has already occurred this year, as the Covid-19 pandemic that began in October has wreaked havoc on Foxconn’s mega factory in Zhengzhou, where the company manufactures the vast majority of its products.
Factories and workshops across China may experience severe staffing shortages as a result of the Chinese government’s decision to end its zero-Covid policy.
While Apple is working with its component suppliers to reallocate resources to factories in other countries, Foxconn has already begun reallocating resources to some of its smaller production facilities in China.
As it stands, the Chinese Foxconn factories are unable to keep up with demand for the iPhone 14 Pro and a few older models, and the COVID outbreak and shortage of key components have only made matters worse. This holiday season, Apple sold about 20% fewer iPhone 14 Pros than expected. Compared to last year’s holiday season, Apple sold about 15 million fewer iPhones overall.
Experts predict that the company’s revenue this quarter will be slightly lower than the record $123.9 billion it achieved in the same period last year, and that its net profits will fall by more than 8 percent. If this happens, it would be the first time in 14 quarters that Apple hasn’t grown.
Even though only 10% of iPhones are assembled in China, they generate 20% of Apple’s profits. Since over a million Chinese people are predicted to die from COVID by 2023, this poses a significant risk to Apple’s revenue forecast for that year.
Samsung, Apple’s main competitor, left China in 2019 and now produces its products in at least four different countries.
Foxconn, Pegatron, and Wistron, three of Apple’s largest suppliers and manufacturers, are looking to India as a result of this, with the expectation of rapidly expanding their operations there. CyberMedia Research estimates that India is responsible for the assembly of 7–8% of all iPhones sold. Partners in Taiwan are hoping to increase this figure to 18% by the end of 2024 and 25% by the end of 2025.
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