Apple shares are lower premarket following a new report that iPhone production will be flat this year, according to Bloomberg, citing people familiar with its projections.
Market forecasts, including ones from IDC Research and Bloomberg Intelligence analysts, had predicted total production figures for the year at around 240 million units. However, sources say output could be 8.3% lower, at about 220 million.
One of the world's biggest companies, Apple, isn't immune to the continuing effects of supply chain disturbances stoked by China's zero COVID policy, disrupting factories in the Shanghai area since late March. Last month, the tech behemoth warned it would recognize a $4 billion to $8 billion range hit in the current quarter because of the disruptions.
Nikkei Asia reported Wednesday that at least one of Apple's new iPhone 14 models could experience delays in mass production because of the disorder in Shanghai.
A supply chain analyst with the Taiwan Institute for Economic Research, Chiu Shih-fang, told Nikkei: "China has not yet returned to normal" despite strict zero-COVID policies easing in the greater Shanghai area. The analyst noted, "It would take at least one to two more months for the supply chain to recover."
Here's a glimpse into Apple's supply chain.
Apple's overreliance on Shanghai factories for the final assembly of its iPhones shows tremendous weakness in its supply chains to mitigate disruptions (and inability to shift production elsewhere).
It's just not Apple. The overall smartphone industry is in turbulent times. Strategy Analytics expects global smartphone shipments to decline 2% in 2022, and TrendForce downgraded the full-year production forecast earlier this month.
Apple shares have been hammered into a bear market since the end of March. As of 0630ET, premarket trading is down 1.5%.
On the demand side, Apple is betting its more affluent customer base will fuel new sales, according to the people. They added there's less competition in the global smartphone market now that some Western governments have banned rival Huawei Technologies Co. and other Chinese phone makers.
Apple also faces high inflation in a low-growth economy. It released a statement Wednesday about increasing wages for workers by 10%. Today's news of the possibility of lower production of its top-selling product could cut into margins.