Apple's business is under threat from the widespread outbreak of the new coronavirus in China. Experts warn that this is likely to lead to a shortage of workers in parts factories or assembly plants across the country, further affecting iPhone production for several months.
Bindiya Vakil, CEO of California-based research firm Resilinc, which tracks more than 3 million component suppliers and provides supply chain mapping services, said: "We may see a lot of businesses being affected by absenteeism." The impact is not just on factories, but also on warehouses, distribution, logistics and transportation facilities."
According to reports, an Apple store in Beijing had to shorten its working hours last week because all the employees fell ill. At present, Apple will at most postpone unfinished orders and will not cancel them directly. But Apple's revenue in 2023 is likely to decline, because one-fifth of Apple's revenue comes from sales in the Chinese market, and more than 90% of iPhones are assembled in China.
The consensus among analysts is that Apple is facing a production shortage of 5 million to 15 million iPhones, its revenue this quarter (October-December) may be slightly lower than the same period last year, and its net profit is also expected to decline by more than 8%. That would break a record 14 consecutive quarters of revenue growth.
"The next two to six months will be a pivotal moment for Apple's supply chain as China has yet to deal with the outbreak," said Alan Day, chairman of London-based supply chain consultancy State of Flux. Mature."
In October of this year, Foxconn, Apple's main foundry in Zhengzhou, China, had its production capacity interrupted for more than a month due to the outbreak of the epidemic and strict lockdowns. Foxconn has now shifted some production to other factories across China, while Apple is working with its component suppliers to reduce delivery times.
Tesla's Shanghai factory shut down
At the same time, Tesla, a major electric vehicle manufacturer, also announced on the 24th that it would suspend production at its Shanghai plant. According to an internal notice and two anonymous sources familiar with the matter, Tesla and its supplier workers have been sick after China's unwinding "cleared", which has brought challenges to the company's operations in the past week, so it must stop work.
In response, Tesla China responded on the 26th, pointing out that this is the annual production line maintenance work as planned. Tesla China stated: "The Shanghai factory will still maintain efficient production and excellent output in 2022... The media's statement that the factory is shutting down is not entirely accurate." During the period, personnel must rest and reorganize, and the charging piles and other workshops did not stop during the period.
Tesla originally planned to suspend Model Y production at the Shanghai plant from the 25th to January 1, 2023. Its latest announcement came a day earlier than originally expected. It is not customary for Tesla's Shanghai plant to shut down during the year-end period.
China's weak economy
This spring, China's strict "clearance" policy led to the closure of some factories and shortages of auto parts. However, after the government relaxed the lockdown, the surge in the number of confirmed cases and the illness of a large number of employees seriously disrupted business operations and factory production capacity.
Moreover, even though people are now supposedly free to move about, based on high-frequency data on subway and road use, there has been little rebound in data on people going out since early December. Bloomberg quoted data as an example, the number of passengers on the Beijing subway on the 22nd was 70% lower than the level on the same day in 2019, and the level of street traffic congestion was only 30% of that in January 2021. Similar situations have emerged in other major cities such as Chongqing, Guangzhou, Shanghai, Tianjin and Wuhan.
