by Tim Higgins | Update November 06, 2022 09:01 PM EST
Low production capacity is affecting the company’s high-end iPhone 14 Pro and Pro Max models
Apple Inc warned that shipments of its high-end iPhone models would be hampered amid COVID-19 restrictions on one of its major suppliers in China, as the company enters its all-important holiday shopping season.
The Cupertino, Calif., tech giant said Sunday that the assembly factory in Zhengzhou is currently operating but at reduced capacity.
“We now expect lower-than-expected iPhone 14 Pro and iPhone 14 Pro Max shipments and customers will experience longer wait times to receive our new products,” the company said.
Last week, Apple-supplier Foxconn Technology Group entered a week-long lockdown at its Zhengzhou campus after battling the ongoing COVID-19 outbreak. The facility, known as iPhone City, is the world’s largest assembly site for Apple’s smartphones and is home to hundreds of thousands of workers.
Foxconn attempted to create a closed-loop system to contain the spread of COVID-19, largely locking out large numbers of workers from the outside world and confining them to their homes and specific parts of the factory Gone. Some refused to return to the factory, worried about the spread of the disease. Some workers fled from the spot.
According to Counterpoint Research, the Zhengzhou facility typically produces more than 80% of the iPhone 14 base model and more than 85% of the high-end Pro models.
On Sunday, Apple said it sees strong demand for high-end iPhones, and that it is prioritizing the health and safety of workers in its supply chain. “We are working closely with our suppliers to return to normal production levels while ensuring the health and safety of every employee,” Apple said.
Foxconn said it is working with the government “to stamp out the pandemic and resume production at its full capacity as soon as possible.” Starting Monday, Foxconn is moving all of its workers who can still work to three dormitory areas and limiting their range. Movement between those hostels and factories, according to a post on his WeChat social-media account.
Foxconn also revised its October-December forecast due to the COVID-19 outbreak in Zhengzhou, the company said in its monthly revenue report released on Monday. Earlier, Foxconn said it is cautiously optimistic about the fourth quarter.
The disruption could rank as the biggest Covid-era shock ever for Apple, which has been able to navigate around the kinds of supply-chain disruptions that have crippled rivals and other industries.
The iPhone company has churned out record profits during the past two years due to iPhone sales, which has helped fuel investor enthusiasm and propel the company’s stock to new highs, though those gains have waned in recent months. I have come
Still, Apple remains a rare bright spot among tech companies and its expensive phones have proven largely resilient to a downturn in the broader smartphone market.
The company’s stock closed Friday at $138.38 per share, down about 24% from the beginning of the year. Other tech stocks have fallen heavily this year, such as Meta Platforms Inc., which is down more than 70% over the same period.
In less than two weeks, the company posted record revenue growth for the quarter ended September and said it expects continued year-on-year sales growth in the October-December period. The so-called fiscal-first quarter is traditionally Apple’s biggest and most important one as it benefits from holiday shoppers buying the latest iPhones and other gadgets.
Apple has taken advantage of buyers for its most expensive iPhone Pro models, pushing average selling prices to new records, with some models costing more than $1,000. Sales have been helped by generous incentives offered by US cellular phone carriers eager to lock in customers as part of the upgrade cycle to iPhones with 5G cellular connectivity.