Apple warns of iPhone shipping delays due to Covid-19 restrictions at plant in China

Apple expects lower shipments of premium iPhone 14 models than previously anticipated following a significant production cut at a virus-blighted plant in China, dampening its sales outlook for the busy year-end holiday season.

Demand for high-end smartphones assembled at Foxconn's Zhengzhou plant has helped Apple remain a bright spot in a technology sector battered by consumer spending cutbacks amid surging inflation and interest rates.

But the Cupertino, California-based vendor has fallen victim to China’s zero-Covid-19 policy, which has seen global firms including Canada Goose Holdings and Estee Lauder Companies shut local stores and cut forecasts.

"The facility is currently operating at significantly reduced capacity," Apple said on Sunday without detailing the scale of the reduction.

"We continue to see strong demand for iPhone 14 Pro and iPhone 14 Pro Max models. However, we now expect lower iPhone 14 Pro and iPhone 14 Pro Max shipments than we previously anticipated," it said in a statement.

Reuters last month reported that iPhone output could slump as much as 30 per cent in November at Foxconn’s Zhengzhou factory – one of the world’s biggest – due to Covid-19 restrictions.

The factory in central China, which employs about 200,000 people, has been rocked by discontent over stringent measures to curb the spread of Covid-19, with many workers fleeing the site.

Market researcher TrendForce last week cut its iPhone shipment forecast for October-December by two million to three million units, from 80 million, due to the factory’s troubles, adding its investigation found capacity utilisation rates around 70 per cent.

Apple, which began selling its iPhone 14 range in September, said customers should expect longer waiting times.

“Anything that affects Apple’s production obviously affects their share price,” said Quincy Krosby, chief global strategist at LPL Financial in North Carolina, in the United States.

“But this is part of a much deeper story – the uncertainty surrounding the future of the Chinese economy... These headlines are part of the ongoing saga as to whether there is any truth to the consistent rumours that authorities are discussing whether some of the measures will be lifted in the first quarter.”

China on Monday reported its highest number of new Covid-19 infections in six months, with disruption to the world’s second-largest economy spreading nationwide since October. At the weekend, health officials said they would stick with strict coronavirus curbs, disappointing investors hoping for easing.