Apple shares plunge amid growing iPhone shortage due to China protests

Apple shares plunge amid growing iPhone shortage due to China protests

  • Apple is facing a growing shortage of iPhones due to protests in China over government policies to prevent the spread of the novel coronavirus.
  • The company has seen $96 billion in market value since being wiped out last week on concerns of weak holiday sales.
  • Wedbush analyst Dan Ives estimated that Apple could see a 10% decline in iPhone unit sales during the quarter.

apple Its market value has seen a $96 billion decline since last Wednesday as investors grow increasingly concerned about the ongoing iPhone shortage and impacting the company’s strong holiday earnings results.

Apple has faced a shortage of its iPhone 14 Pro models in recent weeks, but the lack of iPhone supply has clearly increased amid protests in China against government policies to prevent the spread of the new Corona virus.

China is still pursuing a COVID-free policy, where a few reported infections can lead to a complete lockdown of an entire city. Meanwhile, the country has yet to roll out COVID-19 vaccines that are as effective as those in the US Pfizer And the Moderna.

In October, a COVID outbreak at Foxconn’s iPhone assembly plant in Zhengzhou caused many employees to abandon “iPhone City” Avoid strict lockdown measures. last week, Violent protests erupted at the Foxconn iPhone factory Due to strict lockdown policies.

Now, civil unrest and protests against COVID lockdown policies are spreading across the country, with A fire in an apartment recently killed 10 people Escalating public anger against the government, with restrictive COVID policies blamed.

The situation in China is bearish for Apple as it limits its ability to capitalize on its historically strongest quarter of the year. Scheduled delivery dates for all versions of the popular iPhone 14 Pro model have been pushed back until after Christmas, on December 28, according to its website. The lowest-cost iPhone 14 models currently offer immediate availability.

Apple is “very limited in its options,” according to Wedbush analyst Dan Ives, because it relies heavily on China to manufacture a large portion of its devices. Ives estimated that the protests in China could reduce Apple’s iPhone unit sales this quarter by as much as 10%. according to to a Bloomberg reportcould lead to a shortage of 6 million iPhone pro units.

“The zero COVID China policy was a deathblow to Apple’s supply chain with the Foxconn protests in Zhengzhou a black eye for both Apple and Foxconn. The reality is that Apple … is at the mercy of the zero Covid China policy which remains a very frustrating situation,” Ives said. “Now it’s the agonizing waiting game to see what increased production over the next week looks like for Apple to alleviate some of the iPhone shortages that are mounting globally.”

But the rise in iPhone production hinges on de-escalation of protests in China, as well as declining COVID-19 cases, and that is looking increasingly difficult, according to the Goldman Sachs.

“Local governments are struggling to balance quickly in controlling the spread of the virus and complying with the ’20 measures’ that mandate a more targeted approach. The central government may soon need to choose between more lockdowns and more COVID outbreaks,” Howie Goldman Sachs wrote in a note. Sunday.

And Apple may not be able to break out of its poor relationship with China any time soon, even considering its recent moves to diversify manufacturing into other countries like Vietnam and India. In a note from earlier this month, American bank He said it would take many years for Apple to diversify a significant amount of its manufacturing exposure away from China.

“We don’t expect a rapid decoupling from China anytime soon. In our view, there should be a significantly greater focus on system on a chip and more modular design/automated assembly, which we don’t expect to happen quickly. Having a large part of the supplier base is also in China further complicates the shift away from China.”

While Wedbush maintains its “Outperform” rating and $200 price target, Bank of America takes a more cautious approach with a “Neutral” rating and $154 price target. Apple shares fell more than 2% to $144.86 on Monday.

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