Analysts reduce estimated number of iPhone 14 shipments, after production problems at huge Foxconn factory in China
Analysts at Morgan Stanley have reduced their Apple iPhone shipment forecast by an additional 3 million units this week.
The adjusted forecast takes into account the slower iPhone production for the December quarter, after a Covid-19 outbreak and strict regional lockdown at the world’s largest iPhone factory in China.
Indeed, last month the head of one of the largest electrical retail chains in the United States warned about shortages of the iPhone 14 in the holiday season.
Best Buy CEO Corie Barry said that Apple’s high-end iPhones would be in short supply at stores this holiday season.
Barry said the US electronics retail giant was seeing a shortage in stocks of the premium iPhones and had factored the expected loss in sales into its holiday quarter forecast.
Now analysts at Morgan Stanley have again trimmed their shipment estimates for the iPhone.
The analysts had previously cut 6 million shipments in November, and now the iPhone shipment forecast for the December quarter has been reduced by an additional 3 million units on Wednesday.
This brings the current forecast down from 85 million to around 75.5 million units, CNBC reported.
Morgan Stanley analysts have said the unrest will impact what is historically Apple’s biggest quarter, which is bolstered by the Christmas shopping season.
Despite the expected dip in shipments and revenue, the analysts said the forecast does not necessarily reflect slowing demand.
“By now it’s well understood by investors that the Dec Q will be challenged due to iPhone supply shortages, and therefore the most important near-term debate is really how much of the lost demand from December is perishable vs. deferrable,” the analysts were quoted by CNBC as writing in a Wednesday note.
“We believe demand for the iPhone 14 Pro/Pro Max remains solid, supporting the view that lost demand in December is more likely to be deferred into March than destroyed.”
Last month Foxconn’s main iPhone plant in Zhengzhou, that employs some 200,000 workers and is sometimes referred to as “iPhone City”, was placed in a seven day lockdown.
Chinese authorities took the decision to lockdown the whole area after the Taiwanese company had tried to control a Covid outbreak at the world’s largest iPhone factory.
Before the lockdown kicked in, local reports had suggested that significant numbers of workers at the Zhengzhou plant had fled the site, as Coronavirus cases rose, due to fears of lockdowns or Covid-19 outbreaks.
That lockdown itself lasted until 9 November, and it did not appear to stop cases spreading however, with infections identified in October and November.
Although the lockdown ended at the facility, production was still down (by as much as 30 percent) due to a lack of staff.
Foxconn had previously said it would do everything it possibly can to fulfil its order book, and Chinese officials began drafting in retired members of the military and government to help negate the worker shortage.
But worse was to follow last month when workers at the Zhengzhou iPhone factory clashed with Chinese riot police, after a salary payment problem.
Foxconn apologised for the salary error.
Chinese officials have also been accused of “performative lockdown lifting” after reports people’s freedoms were still restricted inside the factory.
All of these issues saw Apple take the unprecedented step last month and warn customers of longer wait times for new iPhones.
The disruption has also led Apple to accelerate its plans to shift some production to India and Vietnam.
The factory is critical to Apple, as about 70 percent of iPhone assembly takes place at the Zhengzhou complex.
Earlier this week Foxconn said its Zhengzhou factory should resume full production in late December or early January.
Normally the plant has 200,000 workers, who produce a staggering 500,000 iPhones a day.
China has also now relaxed its strict zero Covid lockdown strategy after mass protests. Foxconn reportedly also helped influence this relaxation by the Communist government.