Tech giant Apple says its operations in China, where much of its iPhone manufacturing is concentrated, have been seriously disrupted by the COVID-19 coronavirus outbreak.“Work is starting to resume around the country, but we are experiencing a slower return to normal conditions than we had anticipated,” said Apple in a letter to investors on Monday . “As a result, we do not expect to meet the revenue guidance we provided for the March quarter due to two main factors.”
The first, the company said, is that global iPhone supply will be temporarily constrained. While manufacturing sites have reopened, their return to operations is happening more slowly than envisioned. Production partner Foxconn also has shifted some of its capacity to producing medical masks at its huge Shenzhen facility because the masks are in critical short supply.
“The health and well-being of every person who helps make these products possible is our paramount priority, and we are working in close consultation with our suppliers and public health experts as this ramp continues,” the company said. “These iPhone supply shortages will temporarily affect revenues worldwide.”
Some analysts have noted that Apple relies on cobalt, the 3TG minerals (gold, tin, tungsten and tantalum) and other inputs from African nations, which may feel supply chain impacts if production slowdowns are prolonged. The company’s 2018 Conflict Minerals Report , filed with the United States government, lists 29 African nations from which 3TG minerals were sourced.
The second concern is demand for iPhone products within China, because many of the stores are closed. “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. Our corporate offices and contact centers in China are open, and our online stores have remained open throughout.”
Apple said it will have more information by April, when the next earnings call is scheduled.