Apple takes a hit as supply chains not fully restored amid coronavirus outbreak

By Yin Yeping Source:Global Times Published: 2020/2/20 23:01:18

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The smartphone industry has been hit hard, as the COVID-19 outbreak continues. Industry analysts forecasted Apple's iPhone sales in China may fall by at least 40 percent to 50 percent in February and March compared with the same period last year.

Liang Zhenpeng, a senior industry expert, told the Global Times on Thursday the COVID-19 outbreak has dealt a heavy blow to the sales of all mobile phone suppliers in China, including Apple.

"The iPhone's sales in the first quarter of this year are likely to be less than half of the same quarter in 2019," he said. "Mobile phone sales, both online or offline, are very difficult during this period, because the supply chains can hardly be normalized."

Apple CEO Tim Cook said on his Sina Weibo account, China's Twitter-like social media, on Thursday the company welcomes back employees and customers and looks to work alongside their manufacturing partners to resume operation as safely and steadily as possible.

Wei Jigang, a research fellow with the Development Research Center of the State Council, told the Global Times on Thursday the epidemic outbreak impacts Apple's business.

"Apple has a global supply chain, not just in China. But China, as an important part of the chain, will affect their businesses," Wei said, adding that the impacts could influence the launch of new Apple products.

Apple shares slid after lowering its Q1 sales guidance due to the novel coronavirus. The company's stock has been volatile for nearly a month, with industry experts believing the outbreak contributed to the uncertainty.

Apple announced on February 1 the temporary closure of all its retail stores across China amid the epidemic. Though the stores are gradually resuming business now, but with flexible working hours.

An employee at an Apple store in Sanlitun, Beijing said the opening hours are shorter than before.

"Today, the store is open from 11 am to 6 pm, but tomorrow's opening hours depend on the situation," she said, adding that the opening hours of each day may be adjusted, depending on the outbreak. 

The staff said there are more customers compared with a few days ago, but relatively less than it used to be. She noted that the situation is similar at other Apple retail stores.

Apple told the Global Times on Thursday they have no information available on the specific impact or loss assessment and how to respond to the outbreak.

However, experts believe the epidemic outbreak has impacted the supply chain in China, which Apple heavily relies on for its global businesses.

A worker surnamed Meng at Apple's biggest contract manufacturer, Foxconn's Zhengzhou plant in Henan Province, said the factory resumed work on February 10, but due to restrictions of traffic and other problems amid the epidemic, some employees from other places are unable to rejoin work. The factory is now recruiting new workers to meet staff shortages.

A manager surnamed Li with Foxconn factory in Taiyuan, Shanxi Province, told the Global Times on Thursday as one of the factories, supplying mobile accessories to various smartphone firms, the factory's production line cannot run normally because of the staff shortages.

Li said on a day when Taiyuan's factories are operating in full-scale 80,000 employees usually work, but currently, the gap is huge.

"We definitely have a hiring plan, since we're missing a lot of people," she said. "We resumed work on February 12 and at present only 30 percent of the total staff have resumed work, besides employees returning from other provinces must be quarantined for 14 days."

Meanwhile, due to the unique situation triggered by the epidemic, they are not allowed to introduce a large number of employees, but can only interview a small number of employees every day.

Another supplier of Apple, BOE, told the Global Times on Thursday they are yet to fully resume work.

"The impact of the outbreak is certainly there and if our other business partners are affected, so are we," said a customer service representative with China's panel display-maker BOE. She noted the iPhone's LCD screens belong to the first-line products, and its factory in Beijing has partially resumed production.

Apple analyst Shannon Cross from Cross Research anticipates people are going to experience iPhone shortages outside of China. "In theory, it shouldn't be demand destructive. It should just mean there should be a larger backlog of demand when these issues are resolved," she said, according to Bloomberg's report on Tuesday.

Apple is not the only smartphone company that has been hit by the epidemic 

China's smartphone shipment declined 50 percent to 60 percent during the 2020 Spring Festival holidays due to the novel coronavirus outbreak. So far, about 60 million smartphones remain unsold, among which Huawei's devices account for one-third, industry analysts said.

"There are at least hundreds of components involved in a mobile phone, and if one manufacturer is unable to resume work due to the outbreak, the entire supply chain will be cut off," Liang said, adding that the mobile phone industry may soon recover about 80 percent normal sales rate if the epidemic can be contained by late March.


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