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Apple’s supply chain issues caused by the coronavirus outbreak are about to get even worse following the delayed reopening of Foxconn’s assembly plant.
Foxconn – which is responsible for about half of China’s smartphone exports, including the iPhone – received approval to restart production at its Zhengzhou plant with 10 percent of its workforce, according to Reuters. The company’s Shenzhen plant remains closed and it is not yet known when full operations would resume at either location.
The news out of China will “disrupt the supply chain further for Apple on both its core iPhone franchise and AirPods unit production, which is already facing a short supply heading into this week,” wrote Dan Ives, a New York-based managing director at Wedbush Securities.
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Apple, which has pushed back the scheduled Feb. 9 reopening of its 42 stores in China by a few days, did not immediately respond to FOX Business’ request for comment.
Ives says once the plant is reopened it will take one to two weeks to ramp production back up to full speed and that for every week the reopening is delayed an additional 1 million iPhones need to be removed from his quarterly forecast.
He is currently forecasting 44 million iPhones for the current quarter and believes there is a downside risk of 3 million to 5 million iPhones for the March to June period if the supply-chain issues last for another two to three weeks.
As for AirPods, Ives believes production will need to “ramp significantly” in order to meet the increased global demand to reach his 85 million to 90 million forecast for calendar year 2020.
On Apple’s first-quarter earnings call on Jan. 28, Apple CEO Tim Cook warned the impact of the coronavirus was unknown and that the company was “working on mitigation plans to make up any expected production loss.”
As a result, Apple forecast revenue of $63 billion to $67 billion for its March quarter, a wider range than usual, due to the uncertainty caused by the outbreak. Wall Street analysts were expecting revenue of $62.41 billion.
“If extended production delays continue for another 7-10 days, then we believe there is risk of Apple hitting the lower end of its wide guidance range ($63 billion to $67 billion) due to the coronavirus is likely and we/Street will need to adjust accordingly based on the supply chain issues,” Ives wrote, while maintaining his “outperform” rating and $400 price target – 25 percent above where shares closed on Friday.
Apple shares were up 9 percent this year through Friday, outperforming the S&P 500’s 3 percent gain.
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FOX Business’ R.N. White contributed to this report.
