Apple warns China’s Covid-19 curbs have forced it to temporarily reduce iPhone production

Customers will experience longer wait times as the company’s assembly facility in China is operating at significantly reduced capacity

Apple said that Covid-19 restrictions have 'temporarily impacted' production at Foxconn's vast iPhone factory in central China. AFP
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Apple has warned that Covid-19 restrictions have temporarily affected its iPhone 14 Pro and iPhone 14 Pro Max assembly facility in Zhengzhou, China.

The facility is currently operating at significantly reduced capacity, the company said in a statement on Sunday.

“We continue to see strong demand for iPhone 14 Pro and iPhone 14 Pro Max models,” the Cupertino, California-based electronics maker said.

“However, we now expect lower iPhone 14 Pro and iPhone 14 Pro Max shipments than we previously anticipated and customers will experience longer wait times to receive their new products.”

Most of Apple’s smartphones and tablets are assembled by contractors with factories in China, but the company started to look at the possibility of moving some production to South-East Asia or other places after repeated shutdowns to fight Covid-19 disrupted the global flow of products.

In September, Apple said it would make its iPhone 14 in India, as manufacturers shift production from China amid geopolitical tensions and pandemic restrictions that have disrupted supply chains for many industries.

The latest model will be shipped out by Foxconn, a major iPhone assembler, whose facilities are on the outskirts of Chennai, a city in south-east India.

Apple is likely to shift about 5 per cent of its iPhone 14 production to India from later this year, raising it to 25 per cent by 2025, the Press Trust of India news agency said, citing a JP Morgan report.

Supply-chain risks such as the stringent Covid-19 lockdowns in China are likely the trigger for such relocation efforts that will continue over the next two or three years, the report said.

“We are working closely with our supplier to return to normal production levels, while ensuring the health and safety of every worker,” Apple said in its statement.

The world's most valuable company is backing off from plans to increase production of its new iPhones this year after an anticipated surge in demand failed to materialise, sources told Bloomberg in September.

Apple told suppliers to pull back from efforts to increase assembly of the iPhone 14 product family by as many as 6 million units in the second half of this year.

Instead, the company will aim to produce 90 million handsets for the period, roughly the same level as the previous year and in line with Apple’s original forecast this summer, Bloomberg reported.

Demand for higher-priced iPhone 14 Pro models is stronger than for the entry-level versions, according to Bloomberg.

Global demand for personal electronics has been suppressed by surging inflation, recession fears and disruption from the war in Ukraine. The smartphone market is expected to shrink by 6.5 per cent this year to 1.27 billion units, according to data from market tracker IDC.

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Apple, which had a market value of $2.2 trillion as of the close of trading last Friday, reported a flat 2022 fiscal year fourth-quarter net profit despite record revenue in the July-September period.

The company’s net profit in the period ending on September 24, edged up to about $20.7 billion from $20.6bn from the same period a year earlier.

Revenue rose 8 per cent year on year to $90.1bn during the quarter, beating analyst estimates of $88.9bn compiled by Refinitiv.

iPhone sales accounted for about 47.3 per cent of the company's revenue.

Updated: November 07, 2022, 6:51 AM
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