“Apple has already stated that it expects lower revenue this quarter due to the impact of the viral outbreak in China, affecting both supply and demand”
Apple is reportedly moving parts of its production line for AirPods, iPads, and Apple Watch out of China and into Taiwan, suggests a report by DigiTimes. The incident apparently joins Apple’s MacBook Air and MacBook Pro assembly lines in Taiwan, which too have been recently moved to Taiwan. The incident is being directly related to the coronavirus outbreak in China, which has taken its toll in many industries including technology. According to the report, over one-third of China’s usual production lines remain shut, and the rest are not operating at full capacity either. The factories are also not expected to resume normal operations at least until the first 10 days of March, as the WHO maintains a ‘very high’ risk assessment level for the coronavirus outbreak in China.
Apple has acknowledged that the coronavirus outbreak in China will have an impact on its business for this quarter, with issues including weak iPhone supply globally and weaker sales in China through the period. While the supply crunch is due to factories staying shut for a longer span of time post the extended Chinese New Year holidays, the coronavirus outbreak remains responsible for the weak sales of Apple devices in China through this quarter. According to Apple, many of its retail stores either remain shut or are open in limited hours due to the outbreak of the virus. As a result, Apple expects lower revenue than even the minimum revenue guidance that it had issued last quarter.
With the production lines for the AirPods, iPads and the Apple Watch being moved from China to Taiwan partially, Apple is also likely looking to create a contingency plan for such scenarios in the future. However, it is important to note that while the assembly lines might be moved, most of the component manufacturers are still based in China, and the same would mean that adequate component supply may not come through for the assembly lines to make use of. This particular quarter has been exceptionally weak for Apple, with aspects such as low smartphone sales and decreased wearables and laptop sales across the industry adding to Apple’s coronavirus woes.
Going forward, it remains to be seen how the coronavirus outbreak is contained and how fast the recovery process works out for individuals. Technology companies such as Apple had expected a strong 2020 thanks to better wearable technologies, 5G smartphones, and more, hopes of which have already been severely dented by the viral outbreak in China.