Apple has warned that global shipments of its newest high-end iPhones will be delayed after China’s zero-Covid lockdowns caused havoc at a factory run by key supplier Foxconn.
The tech group made a rare announcement about iPhone delays on Sunday, just over a week after it warned of “significant” headwinds to revenue growth due to the impact of a strong US dollar and supply constraints for its high-end models.
Apple said that demand for the iPhone 14 Pro and Pro Max models, whose popularity helped to drive iPhone revenue up 10 per cent last quarter, remained strong but added: “We now expect lower . . . shipments than we previously anticipated and customers will experience longer wait times to receive their new products”.
The iPhone powers about half of Apple’s global sales, and the December quarter is typically its most lucrative period. Although Apple has repeatedly said that Covid-19 constraints have caused billions of dollars worth of supply issues throughout the pandemic, it has not issued such a warning outside of earnings calls since February 2020.
The delays come after an outbreak inside a 200,000-person factory complex in Zhengzhou owned by Foxconn, Apple’s biggest iPhone manufacturer. Workers, fearing touch restrictions, staged an exodus amid a coronavirus outbreak at the manufacturing facility. Analysts have warned of worsening disruptions heading into winter after more than three-quarters of big Chinese cities reported new Covid cases in October.
The supply constraints could further hamper year-on-year revenue growth for the December quarter, after Apple warned last month that revenues would “decelerate” from 8 per cent growth during the September quarter.
The announcement could weigh on Apple stock when markets open on Monday. Its shares have fallen $800bn this year to a $2.2tn market capitalisation — still the highest among America’s tech giants.
Creative Strategies analyst Carolina Milanesi said: “The restrictions on the factory are impacting what was already a reduced production and limiting supply of the two iPhones in higher demand.”
Foxconn separately announced on Sunday that it would “revise down” its own outlook for the fourth quarter due to the lockdown in Zhengzhou.
It said: “Regarding Zhengzhou park’s pandemic prevention and operation situation, the Henan provincial government has made it clear that it will, as always, fully support Foxconn in Henan. Foxconn is now working with the government in concerted effort to stamp out the pandemic and resume production to its full capacity as quickly as possible.”
Apple said the “primary iPhone 14 Pro and iPhone 14 Pro Max assembly facility located in Zhengzhou, China . . . is currently operating at significantly reduced capacity”. It added: “We are working closely with our supplier to return to normal production levels while ensuring the health and safety of every worker.”
On Saturday, Beijing quashed market rumours that it was considering easing China’s strict zero-Covid restrictions, which had led to a surge in the price of Chinese stocks in Hong Kong last week.