Apple warns of coronavirus causing iPhone shortages

Company hit by shutdown in China and says it will fail to meet quarterly revenue target

Apple has warned of global “iPhone supply shortages” resulting from its Chinese factories being shut because of the coronavirus outbreak.

The Californian company told investors on Monday night it would fail to meet its quarterly revenue target of $63-67bn (£48-52bn) because of the “temporarily constrained” supply of iPhones and a dramatic drop in Chinese shoppers during the virus crisis. Apple did not provide a new forecast for its second-quarter revenue.

Apple makes most iPhones and other products in China. The spread of coronavirus has caused the company to temporarily halt production and close retail stores in China. Some Apple retail stores reopened in China with reduced hours last week.

“Work is starting to resume around the country, but we are experiencing a slower return to normal conditions than we had anticipated,” the company said in a statement. “As a result, we do not expect to meet the revenue guidance we provided for the March quarter.”

Apple said while all iPhone factories outside of the Hubei province, the centre of the outbreak, had reopened, “they are ramping up more slowly than we had anticipated”. It added: “These iPhone supply shortages will temporarily affect revenues worldwide.”

The company, which had already warned about the impact of the virus on its production last month, said “demand for our products within China has been affected”.

“All of our stores in China and many of our partner stores have been closed. Additionally, stores that are open have been operating at reduced hours and with very low customer traffic. We are gradually reopening our retail stores and will continue to do so as steadily and safely as we can.”

Apple’s chief executive, Tim Cook, said last month that the company had provided an unusually wide revenue forecast of $63-67bn because of uncertainty about how dramatically the coronavirus would effect its production. “As you can see from the range, anticipates some level of issue there. Otherwise, we would not have a $4bn range,” he said on 28 January.

The company said: “As the public health response to Covid-19 continues, our thoughts remain with the communities and individuals most deeply affected by the disease, and with those working around the clock to contain its spread and to treat the ill. Apple is more than doubling our previously announced donation to support this historic public health effort.

“The health and wellbeing of every person who helps make these products possible is our paramount priority, and we are working in close consultation with our suppliers and public health experts as this ramp continues.”

Earlier this month Ming-Chi Kuo, an analyst at TF International Securities, said he expected that Apple would be forced to cut iPhone shipments by 10% due to the coronavirus outbreak.

Our latest survey indicates that the iPhone supply is being affected by the coronavirus and, therefore, we cut the iPhone shipment forecasts by 10% to 36-40m units in 1Q20,” Kuo said in a note to analysts on 2 February.

Apple does not discloses how many iPhones it ships each quarter, but Kuo estimated that the company shipped about 38m during the first quarter of last year.

“The situation is evolving, and we will provide more information during our next earnings call in April,” the company said. “Apple is fundamentally strong, and this disruption to our business is only temporary. Our first priority – now and always – is the health and safety of our employees, supply chain partners, customers and the communities in which we operate. Our profound gratitude is with those on the frontlines of confronting this public health emergency.”

It is the second time in a little over a year that Apple has to cut its revenue guidance due to concerns in China. In January 2019, Apple was forced to slash revenue guidance for its fiscal first quarter of 2019 due to weak iPhone sales in the country.

Contributor

Rupert Neate

The GuardianTramp

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