Apple’s business under growing threat from China’s Covid wave

Supply chain experts warn of a growing risk of months-long disruption to the production of iPhones due to a widespread coronaviruses outbreak in China.

The US tech giant has had to contend with more than a month of chaos at its main assembler Foxconn's megafactory in Zhengzhou, China.

Apple has worked with component suppliers to shorten wait times for customers buying high-end phones in the US, which is about 23 days, according to research by Swiss bank UBS.

There is a risk of worker shortages at component plants or assembly factories across the country as a result of the Chinese government reversing its zero- Covid policy.

"We should be seeing a lot of operations get impacted by Absenteeism, not just at factories, but warehouse, distribution, Logistic and transportation facilities as well."

Ahead of the holiday season, Apple warned of significant disruptions. Less than two weeks had passed since executives forecast subdued sales growth in the crucial period around Christmas.

The consensus among analysts is that company revenues this quarter will fall just below the record $123.9 billion it achieved over the same period last year, with net profits projected to tumble more than 8%. Apple has a shortage of between 5 million and 15 million phones.

Many analysts assumed that unfulfilled orders would not be canceled and that they would be postponed.

One million Chinese people are at risk of dying from Covid during the coming winter months after the president of China removed strict controls on the disease. All of the workers at an Apple store in Beijing were sick last week and the store had to cut hours.

A fifth of Apple's revenue is derived from sales in China. At least four countries have diversified assembly for the mobile phone company.

A demand crisis in China could follow Apple's production and operational troubles, according to an analyst.

Dediu said that the rest of the world saw demand rise because of work-from- home and economicStimulus. Consumers in China could avoid big purchases next year due to low immunity and minimal safety nets.

The Taiwanese suppliers of Apple have responded by expanding their operations in India.

According to Prabhu Ram, head of industry intelligence group at CyberMedia Research in India, the big three Taiwanese suppliers were targeting 18 percent of iPhone assembly to be in India by the year 2024.

Alan Day, chair of State of Flux, a London-based supply chain consultancy, said that China's attempt to stamp out the disease rather than manage it has left the country's assembly lines exposed.

China's immaturity of handling Covid will be a defining moment for Apple's supply chain. The rest of the world has standards, but China has not embraced them.

Ryan McMorrow reported in Beijing.

The Financial Times is a division of The Financial Times. All rights belong to the person. Not to be copied or altered in any way.