Apple expects lower shipments of the iPhone 14 Pro and iPhone 14 Pro Max, following a significant production cut at a covid virus-blighted plant in China, dampening its sales outlook for the year-end holiday season.
Solid demand for the new iPhones has helped Apple remain a rare bright spot in the global tech sector that has been battered by spending cutbacks due to surging inflation and interest rates.
But the company has now fallen victim to China’s rigorous zero-COVID-19 policy, which has already prompted many global firms including Ester Lauder Companies Inc and Canada Goose Holdings Inc to shut their stores in China and cut full-year forecasts.
In a statement Apple said:
COVID-19 restrictions have temporarily impacted the primary iPhone 14 Pro and iPhone 14 Pro Max assembly facility located in Zhengzhou, China. The facility is currently operating at significantly reduced capacity. As we have done throughout the COVID-19 pandemic, we are prioritizing the health and safety of the workers in our supply chain.
We continue to see strong demand for iPhone 14 Pro and iPhone 14 Pro Max models. However, we now expect lower iPhone 14 Pro and iPhone 14 Pro Max shipments than we previously anticipated and customers will experience longer wait times to receive their new products.
We are working closely with our supplier to return to normal production levels while ensuring the health and safety of every worker.
Apple’s main Zhengzhou plant in central China, which employs about 200,000 people, has been rocked by discontent over stringent measures to curb the spread of COVID-19, with many workers fleeing the site.
China on Sunday reported its highest number of new COVID-19 infections in six months, a day after health officials said they were sticking with strict coronavirus curbs, likely disappointing recent investor hopes for an easing.
Taiwan’s Foxconn, the operator of the Zhengzhou factory, said on Monday it was working to resume full production at the plant as soon as possible, and revised down its fourth quarter outlook.
It said it would implement new measures at the plant to curb the spread of COVID-19, including a system that would restrict working employees’ travel to between their dormitory and factory area.
Shares in Foxconn fell 0.5% in early trade on Monday, lagging a 1.2% rise in the broader index.
China ordered an industrial park that houses the iPhone factory to enter a seven-day lockdown on Wednesday, in a move set to intensify pressure on the Apple supplier as it scrambles to quell worker discontent at the base.
The Zhengzhou Airport Economy Zone in central China said it would impose “silent management” measures with immediate effect, including barring all residents from going out and only allowing approved vehicles on roads within that area.
Foxconn said in a statement that the provincial government in Henan, where Zhengzhou is located, “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.”