[Asia Economy Reporter Seulgina Jo] It is anticipated that the iPhone supply delay, which was directly impacted by the novel coronavirus disease (COVID-19), will continue until April. This report came shortly after Apple downgraded its quarterly revenue forecast, stating that iPhone supply could be "temporarily" halted. It is expected that the release schedule of the upcoming budget model, iPhone SE2, will also face setbacks.
On the 19th, Nikkei Asian Review, citing sources familiar with the matter in Taiwan, reported that "the operating rate of iPhone production plants in China is currently only 30-50%" and that "the iPhone supply delay will continue until April." The source added, "There are many obstacles ranging from labor shortages within the factories to logistics issues." Among Apple's top 200 suppliers, 75% operate one or more production plants in China. It is estimated that 22% of these suppliers operate three or more plants.
Foxconn, one of Apple's suppliers, resumed production at plants including the Zhengzhou factory last week. However, it is reported that some employees have yet to return. Similarly, Hon Hai's Zhengzhou plant, which also resumed production around the same time, has not yet recovered its operating rate. Nikkei Asian Review expects major suppliers to secure more labor starting next week but reports that it will take more time to return to normal. The publication also noted that even if factory operations normalize, recent stricter quarantine measures have significantly increased difficulties in logistics overall, including parts and product transportation.
If this delay continues, it will inevitably disrupt Apple's new product launch strategy. Another source said, "Suppliers are doing their best to produce budget iPhones within four weeks," adding, "Apple's new product launches in the second half of the year could also be affected." Originally, Apple planned to start mass production of the iPhone SE2 this month, but it is now expected to be postponed until the end of March.
There have also been reports that Apple is relocating part of the iPhone SE2 production to Taiwan. However, Apple-specialized media Nine to Five Mac reported that Apple will unveil the iPhone SE2 at the end of next month and release it on April 3.
Nikkei Asian Review evaluated, "Apple, which has China as its largest production base, is being directly hit by COVID-19," and confirmed that "the impact on iPhone supply is greater than expected." The day before, Apple officially confirmed that due to the COVID-19 impact, its largest production base and supply chain in China temporarily stopped, making it difficult to achieve the initially expected quarterly revenue. This announcement is considered unusual.
On the other hand, JP Morgan stated, "COVID-19 will have a significant short-term impact on Apple's supply chain," but also noted, "Once the COVID-19 impact subsides, inventory adjustments from the demand side could begin in earnest." According to market research firm TrendForce, global smartphone shipments in the first quarter (January to March) are estimated to have decreased by 12% year-on-year to 275 million units. By company, Apple's shipments are expected to decline by 10%.
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