Apple on Monday became one of the first companies to reveal how the coronavirus that has gripped China was affecting its business, saying it was cutting its sales expectations for this quarter, which a month ago it had projected to be robust, The New York Times reported.
The iPhone maker, which is highly dependent on Chinese factories and Chinese consumers, said in a statement that its supply of smartphones would be hampered because production was ramping up more slowly than expected as China reopened its factories. Apple also said that demand for its devices in China had been hurt by the outbreak; it closed all 42 of its stores in the country last month and most have yet to reopen.
“Work is starting to resume around the country, but we are experiencing a slower return to normal conditions than we had anticipated,” said Apple, one of the world’s most valuable public companies.
Many global firms rely on factories in China to manufacture goods as varied as socks and laptop computers. And Chinese consumers, who had ridden a wave of rising wealth, had been avid buyers of luxury goods, iPhones and many other items.
Fears over the coronavirus’s impact on the global economy and business have been growing. As of Tuesday morning in China, more than 72,000 people had been infected by the coronavirus and over 1,800 had died worldwide, officials reported. About three-quarters of a billion people in China are under some kind of lockdown orders, according to a New York Times analysis.
Apple’s action on Monday “is the first of many we’re going to see around the coronavirus impact,” said Daniel Ives, managing director of equity research at Wedbush Securities. “Apple is heavily exposed. It confirms the worst fears that the iPhone impact was going to be more dramatic than expected.”
Apple, which is widely regarded as a bellwether of global supply and demand for goods, has bet big on China in recent years. Timothy D. Cook, the chief executive, worked with China’s telecom providers to introduce the iPhone in the country last decade. After that, Apple’s already substantial sales took off further. China is now the company’s second-largest market after the United States, the Times added.
Apple also assembles most of its products in China. Foxconn, the Taiwan company that makes iPhones and other gadgets on behalf of Apple and global electronics companies, has declined to detail which plants have reopened since the Lunar New Year holiday ended but denied a media report that it was aiming to reach 50 percent production levels by the end of this month. None of the factories that make iPhones are in Hubei Province, the center of the coronavirus outbreak.
Countries including Japan and Germany have already been grappling with slowing growth. Japan, which counts on a lucrative flow of Chinese tourists, as well as exports to the country’s enormous market of consumers, may potentially fall into a recession. And there are concerns the coronavirus could crimp Europe’s already weak growth.
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