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According to reports, Apple will lose 6 million iPhone Pros in production as a result of Covid-related turmoil in China.
Apple (NASDAQ: AAPL) stands to suffer a production shortfall of 6 million iPhone Pros due to unrest at a plant in China. Reports state that Covid-linked turmoil at the tech giant’s manufacturing hub of Zhengzhou is to blame for the projected deficit. However, an inside source claims that the situation remains fluid, and the estimate of lost production could change.
Apple iPhone Pros Projected to Take Production Hit from Staff Covid Protests in China
The Foxconn Technology facility in Zhengzhou, which manufactures a huge chunk of Apple’s premium phones, has been wracked with staff agitation. These protests have gone on for weeks as Chinese workers rebel against the country’s stringent Covid lockdown policy. According to reports, the latest protests across China took place over the weekend and threatened to worsen the situation. As it stands, the Taiwanese company that operates the iPhone manufacturing facility is looking to get people back to assembly lines. It previously replaced countless staff who departed in October following chronic food shortages with new employees. However, after a wave of new Covid infections left the facility and the local government on tenterhooks, these new employees rebelled against pay and quarantine practices. Weighing in on the production snag, Anshel Sag of Moor Insights & Strategy noted:
“It demonstrates that everyone, even Apple, is susceptible to supply-chain constraints in China due to Covid.”
More than 20,000 new hires reportedly exited their posts after the protests. In perspective, Apple’s Foxconn facility has a headcount of up to 200,000 during peak iPhone production season.
Apple’s Phone 14 Pro and Pro Max devices are the consumer electronic giant’s most in-demand handsets this year. These premium phone lineups make up for the declining demand for Apple’s standard iPhone 14 models. However, the California-based company recently cut its overall production target from 90 million units to 87 million units due to operability constraints. In light of this drawback, Apple and Foxconn raised 2023 production estimates of iPhone Pros in China to pick up the slack.
Apple Seeks New Production Grounds Outside China
The production deficit in Covid-ravaged China also prompts Apple to search elsewhere for production sites. Reports state that the tech giant recently began manufacturing iPhone 14 handsets in Chennai, India. In addition, JP Morgan analysts foresee Apple manufacturing a quarter of all its products outside China by 2025. Amir Anvarzadeh, an analyst with Asymmetric Advisors, also shares a similar sentiment on Apple seeking alternative manufacturing locations in India and Vietnam. According to Anvarzadeh, “[China’s Covid policies] will force Apple to accelerate the diversification of its production base.”
Analysts have described the significant shortfall in Apple’s operation as among the most prevalent bearish circumstances. So far, the company’s stock is down 17% this year, which is almost identical to the drawdown for the broader S&P 500.
Back in July, Apple released its fiscal third quarter 2023 report, which showed relatively strong iPhone sales and overall revenue. However, the company also sustained declining year-over-year (YoY) profit for the same period.