July 6, 2020

Apple warns coronavirus will hurt iPhones supplies

Customers gather as they take part in a class to learn how to use their iPhones at an Apple Store on January 7, 2019 in Beijing, China.

Apple has warned that disruption in China from the coronavirus will mean revenues falling short of forecasts.

The tech giant said production and sales were affected, and that “worldwide iPhone supply will be temporarily constrained”.

The iPhone maker is the first major US company to say that the epidemic will hit its finances.

Apple, which had forecast record revenues of up to $67bn in the current quarter, did not reveal the likely hit.

“We do not expect to meet the revenue guidance we provided for the March quarter,” the company said in a statement, adding that it was “experiencing a slower return to normal conditions” than expected.

With most stores in China either closed or operating at reduced hours, sales of Apple products would be lower, the company said.

Apple said that “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.

“All of our stores in China and many of our partner stores have been closed,” it added. “Additionally, stores that are open have been operating at reduced hours and with very low customer traffic. We are gradually reopening our retail stores and will continue to do so as steadily and safely as we can.”

Analysts have estimated that the virus may slash demand for smartphones by half in the first quarter in China, which is the world’s biggest market for the devices. The car industry is another sector that has been affected by disruption to its supply chain. Last week, the heavy equipment manufacturer JCB said it was cutting production in the UK because of a shortage of components from China.

“While we have discussed a negative iPhone impact from the coronavirus over the past few weeks, the magnitude of this impact to miss its revenue guidance midway through February is clearly worse than feared,” Wedbush analyst Daniel Ives wrote in a note to clients.

New virus cases outside the epicenter area have been declining for the last 13 days. There were 115 fresh cases outside Hubei announced on Monday, sharply down from nearly 450 a week ago.

But despite hopes that factories and shops are slowing getting back to normal, Apple’s warning will underline that China’s economy will be seriously affected by the coronavirus.

The head of the International Monetary Fund, Kristalina Georgieva, has said there could be a cut of about 0.1-0.2 percentage points to global growth, but stressed there was much uncertainty about the virus’s economic impact.

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