It becomes almost certain that Apple’s turnover for the first fiscal quarter of 2023 (i.e. from October to the end of December because the firm’s financial year begins on October 1) will be strongly affected by supply difficulties. in components and especially by the fall in production of the iPhone 14. As seen this morning, Foxconn, Apple’s main contractor, said that its largest factory should gradually return to a normal level by the start January.
A crisis within the crisis
The city of Zhengzhou, commonly known as “iPhone City” because it is home to the world’s largest iPhone assembly plant, was placed under quarantine two weeks ago.
In an attempt to reduce the economic impact of the closures, factories are allowed to remain open by moving to closed-loop production, where workers remain on campus 24/7 for up to to a month, and sleep in dormitories. This situation is obviously difficult for the employees, who are separated from their families.
In the case of the Foxconn factory, things got worse when an outbreak of COVID-19 broke out within the campus itself. The workers who were already complaining about the lack of food and medicine, have some of them leave the factory and return to their hometown. Subsequent bounty offers had only a limited effect, and the delay in their payment led to violent protests, with some rioting. In the end, more than 20,000 employees left their jobs (out of 200,000 people).
In recent days, restrictions have been relaxed everywhere in China, as the demonstrations had quickly spread to several major cities.
Slow iPhone production
As explained this morning, Foxconn has publicly announced that the COVID-19 outbreak is now under control and it is working to ramp up iPhone production.
At present, the overall epidemic situation has been brought under control, with November being the most affected period.
While the company remains vague on timelines, a Foxconn source says it will take at least another month to get back on track.
Foxconn expects its COVID-hit Zhengzhou, China factory to resume full production around late December or early January, a Foxconn source said Monday, after worker unrest last month disrupted the world’s largest iPhone factory.
A turnover at half mast in the first quarter of 2023?
Foxconn remained vague on the size of the production shortfall, and Apple also declined to comment on the numbers. This leaves only the estimates of analysts, who believe that Apple will lose at least 6 million units on the iPhone 14 Pro, the best-selling models.
This all comes after Apple warned of a holiday supply issue and Foxconn reported “negative growth” for the quarter. And that was before the riots.
So it seems fairly certain that Apple’s revenue for the holiday quarter – the company’s first fiscal quarter – is going to be hit hard.
The impact on the first calendar quarter of 2023 (the second for Apple) is less certain. It will be necessary to monitor the various indicators closely, as well as the behavior of consumers who will not have been able to offer or afford an iPhone 14 at Christmas. Some should wait and therefore postpone their purchase, while others will fall back on other products, sometimes even from competitors.
In your opinion, will Apple recover some of the lost sales next quarter? See you at the end of January for the financial results.