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During the start of 2020, Apple asked its suppliers to produce nearly 45 million AirPod units in the first half of the year owing to high demand. However, suppliers in China have to shut down production due to the coronavirus epidemic putting breaks on Apple’s sales targets.
The coronavirus outbreak in China has raised major concerns across the globe. The news of the virus spread over the last month is haunting global markets at this point. Even the world’s most valued company Apple Inc. is now becoming vulnerable to this virus.
With this epidemic slowly spreading to other regions of the world, Apple’s growth can face major headwinds in the coming days. Since Apple has been manufacturing most of its products in China, there a possible disruption to its supply chain.
Amidst the slowing iPhone sales globally, Apple’s wireless headphones – Apple AirPods – have turned a big craze in the market. The tech giant is witnessing a heavy demand for its AirPods product and the company has asked to ramp-up the production. As reported by the Nikkei Asian Review, Apple has asked its suppliers to produce 45 million units in the first half of 2020.
But, the coronavirus outbreak has forced suppliers to shut down production for at least two weeks. The publication notes that the current stock of Apple AirPods is running low. Although the standard AirPods are still in stock, there’s a month-long waiting period for premium AirPods launched in September 2019.
A person familiar with the matter said:
“Because of the virus outbreak, it has already been about two weeks since the assemblers have shipped any new AirPods series. All of the stores and carriers selling Apple products are really counting on suppliers to resume work next week.”
Analysts Are Closely Watching APPL Stock Movement
Well, this news is likely to bring jitters for Apple investors as analysts are closely watching the APPL stock price movements. In the last year, APPL stock has been an outperformer despite fears of U.S.-China trade war.
The APPL stock gained nearly 90% in the last 365 days taking the company valuations close to $1.5 trillion. But in the last five days, the APPL stock tanked nearly 5% before regaining its lost ground. At press time, the APPL stock is 1.1% up trading at a price of $325.11.
Analysts are closely watching Apple’s move in getting the supplies for its AirPods. Three major AirPods assemblers in China are likely to resume work coming Monday. However, the production utilization is likely to reach 50% during the first week. The person said:
“One of the big concerns is whether other parts suppliers in China can smoothly resume work to produce enough parts for final assembly. We really have to wait and see how things play out next week. If the assemblers could not get enough supply of parts in two weeks, it will be a big problem.”
Jeff Pu, an analyst with GF Securities, says that although the Coronavirus epidemic creates a supply chain shortage, the demand for AirPods will still remain in place.
“For the fast-growing AirPods segment, the coronavirus outbreak only creates the supply shortage issue .. the demand won’t be hampered much. We and most investors do expect the production could gradually pick up the pace once production resumed. … As for how fast, there are still uncertainties, as it depends on whether the contagious disease is contained,” explained he.