In a statement released on Sunday, Apple warned that it expects lower than anticipated shipments of iPhone 14 Pro and iPhone 14 Pro Max than previously anticipated following a significant production cut at its main assembler’s (Foxconn) “iPhone City” plant in China due to the Chinese Communist Party’s quixotic “zero-COVID” lockdowns.
Daniel Ives, Wedbush: Zero Covid Policy in China Strikes Again for Apple. After battling the macro headwinds and delivering a strong September quarter/guidance in a stark contrast to the rest of Big Tech, this latest zero Covid situation is an absolute gut punch for Apple in its most important holiday quarter. With demand remaining firm into holiday season, we would estimate this negatively impacting roughly 3% of iPhone sales this quarter based on impacted China production/supply issues. If Zhengzhou remains at lower capacity the next few weeks, this would cause clear iPhone Pro shortages into the all-important Christmas time period especially in the US. While not the news any bull wants to hear from Apple, its a supply issue and related to China’s zero Covid policy which is a very frustrating situation for Apple (and its investors) yet again but not demand driven. Outperform. $200.
Amit Daryanani, Evercore: COVID Shutdowns Impact iPhone Production. It is unclear what exactly is meant by “significantly reduced capacity”, but if we assume 50% capacity for 7 days that would imply $3B in lost iPhone production or 4% of our forecasted iPhone revenue for the Dec-qtr. Net/Net: China’s Zero Covid policy continues to cause issues for manufacturing in the country, but the key thing to focus on is it is unlikely a short extension in iPhone lead times will cause anyone to leave the Apple ecosystem, so we view demand as deferred rather than lost. Any shutdowns should just lead to a longer than usual iPhone cycle and drive more revenue into the Mar-qtr. Outperform. $190.
MacDailyNews Note: More analysts’ reactions in the full article here.
See also: Tim Cook firmly latched Apple onto China’s CCP teat. What’s his plan for weaning it off? – November 2, 2022
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