Apple Hit Hard by COVID-19 "iPhone Supply Shortage... Difficult to Achieve Sales Targets"

[Image source=AP Yonhap News]

[Asia Economy Reporter Seulgina Cho] Apple has officially confirmed that due to the impact of the novel coronavirus disease (COVID-19) that spread earlier this year, its supply chain in China, its largest production base, temporarily halted, making it difficult to achieve the initially expected quarterly sales.

According to the economic media CNBC, on the 17th (local time), Apple stated in a letter to investors, "Due to two major factors, we will not be able to meet the previously presented quarterly sales guidance." The sales guidance for the first quarter (second quarter in U.S. terms) announced by Apple at the end of last year was $63 billion to $67 billion.

Apple cited a global iPhone supply shortage and deteriorating demand within China as the reasons behind this.

First, Apple explained, "Although factory operations in China have begun to resume, normalization is proceeding more slowly than expected," adding, "The temporary shortage of iPhone supply will affect global sales." Additionally, "Secondly, demand for our products within China has been hit," Apple said, "Many Apple stores and partner stores in China have all closed, and even those stores that remain open are operating during hours with very low customer traffic."

However, Apple added, "Store operations are gradually resuming," and "Demand for products and services outside China is currently meeting our expectations."

This is the first time in about 13 months that Apple has lowered its quarterly sales forecast due to so-called China risk. In January 2019, Apple also adjusted its first-quarter (previous year's fourth quarter) guidance from $89 billion to $93 billion down to $84 billion, citing a slowdown in the Chinese economy, leading the wave of 'China-driven earnings shocks' among major companies at the time.

On this day, Apple did not disclose a separate first-quarter sales forecast figure. CNBC reported, "Apple was expected to launch a mid-range iPhone model this spring, but it is uncertain whether the China impact will affect the release schedule." At the end of the investor letter, Apple emphasized, "Apple's business is fundamentally strong," and "This disruption is temporary."