Apple has delivered its starkest warning to date about the impact of the Coronavirus outbreak in China on its financial results and supplies of its iPhone handsets.
The outbreak has already seen the cancellation of the Mobile World Congress 2020 show, which was scheduled for later this month. As on Tuesday this week, the death toll from the coronavirus has reached 1,873, with 72,436 infections.
Last week the world’s largest contract electronics maker Foxconn denied media reports that its factories in China are fully operational, with reports suggesting only 10 percent of the workforce are available for its factories.
Apple’s latest warning comes on top of the recent admission by CEO Tim Cook during an earnings call that Apple’s current quarter would be hurt by the coronavirus outbreak, because factory shutdowns in China is impacting production.
Apple had forecast record revenues of up to $67bn in the current quarter, but it did not reveal the likely hit from the outbreak.
Apple has also closed all 42 stores in China because of the outbreak.
But now in an investor update, the iPad maker has warned the financial and supply chain repercussions from the outbreak will likely be more severe than first thought.
“Our quarterly guidance issued on January 28, 2020 reflected the best information available at the time as well as our best estimates about the pace of return to work following the end of the extended Chinese New Year holiday on February 10,” said Apple.
“Work is starting to resume around the country, but we are experiencing a slower return to normal conditions than we had anticipated,” it added. “As a result, we do not expect to meet the revenue guidance we provided for the March quarter due to two main factors.”
“The first is that worldwide iPhone supply will be temporarily constrained,” Apple warned. “While our iPhone manufacturing partner sites are located outside the Hubei province – and while all of these facilities have reopened – they are ramping up more slowly than we had anticipated.
“The health and well-being 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,” it added.
And this will result in iPhone shortages the firm confirmed.
“These iPhone supply shortages will temporarily affect revenues worldwide,” Apple stated. “The second is that 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.”
Apple said that it is gradually reopening its retail stores and will continue to do so as safely as it can. It said that its corporate offices and contact centers in China remain open, as have its online stores.
“The situation is evolving, and we will provide more information during our next earnings call in April,” said the firm. “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,” it said. “Our profound gratitude is with those on the front lines of confronting this public health emergency.”
Analysts meanwhile have estimated that the outbreak could cut demand for smartphones by half in the first quarter in China (the world’s largest smartphone market).
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