Apple’s “title” of “the only Big Tech not in crisis” could end in the coming weeks. According to Reuters🇧🇷 forbes and Wall Street Journalthe Cupertino company will have a drop in its income with the problems of Foxconn in China and with inflation in the United States.
As published in early November, Apple released a statement stating that the waiting time for the purchase of the iPhone 14 Pro and iPhone 14 Pro Max models will be longer than usual. The protests against the lockdown inside the factories and against the Covid zero policy affected the manufacture of smartphones. However, production should only return to normal levels at the end of the year.
As disclosed by Counterpoint Researchthe waiting time to receive a iPhone 14 Pro is bigger than at launch🇧🇷 Currently, the average delivery time is 37 days, against 32 days at the model’s debut.
In case of iPhone 14 Pro Max, the waiting time is also 37 days, but it was released with a 39-day term. According to analyst Ming-Chi Kuo, production of the iPhone 14 Pro and 14 Pro Max is expected to fall between 15 million and 20 million units. For the entire line, the forecast is that Apple will deliver between 70 million and 75 million this year-end period. In the fourth quarter of 2021, the company sold more than 85 million iPhones.
The risk that Apple suffers is that consumers, disappointed with the delivery time, give up iPhones as Christmas presents. Of course, this does not mean that these abandoned purchases will only be recovered on the iPhone 15, but that part of them will be “delayed” to some other time in 2023.
Foxconn, the world’s largest electronics manufacturer, is one of the characters in the current protests in China.
With the Covid zero policy, where one case can bring a city to quarantine, Foxconn can use the service method called “closed loop” — it’s like sleeping on twitter but worse🇧🇷 In the closed loop, employees spend the lockdown period at the factory, unable to leave, using the company’s dormitories to sleep.
The sum of Covid zero and closed loop triggered a series of protests in China. At first, the popular revolt was only against the aggressive policy against Covid, but now it also brings protests against President Xi Jinping – who, as published in the The Guardian🇧🇷 not willing to buy “Western vaccines” nor will he be removed from office.
To “lighten the nerves” of employees, Foxconn made a proposal to pay between one and two salaries for those who resigned. More than 20,000 employees accepted the offer. Foxconn’s bad luck who will have to pay it? Not really, bad luck for Apple, which now has to wait for the manufacturer to replace the staff, whose pace is not at all good.
According to Foxconn sources, in contact with the Reuters, the prediction is that the Chinese manufacturer will recover its pre-layoff production in late December or early January. Analyst Kuo says production will be between 30% and 40% of capacity this month.
Apple goes deep to increase production in India
With the troubled relationship between China and the United States again, in addition to the zero covid policy, Apple is strengthening production in other countries. By the end of 2022, 5% of iPhones 14 produced in the world will leave Indian factories. The plan is that by 2025, 25% of all iPhones will be manufactured in India.
What delays this transfer of production is the slowdown in the world economy. For each iPhone line, Apple needs to form a team that will work together with the manufacturers, explaining (and translating) the entire device project. Which also involves entering new countries, causing new expenses. This explains the advantage of having “iPhone City”, Foxconn’s largest iPhone factory. It is gigantic, has 200,000 employees according to CNN, and is located in China, a country where Apple is already established.
As much as in 2025 India should manufacture 25% of the world’s iPhones, the cost for it to take China’s place as the largest manufacturer will be high — and it will take some time for that to happen.
Inflation in the United States also hurts Apple
When Apple presented its third-quarter results, analysts forecast that iPhone sales would increase by 11% in Q4. Now, the estimate has dropped to 2%. In addition to the already mentioned problem in China, inflation in the United States will affect the American consumer, Apple’s main customer.
However, while the drop in production impacts the iPhone 14 Pro and iPhone 14 Pro Max models, inflation will affect the iPhone 14 and 14 Plus (although this nobody is buying anyway🇧🇷 These models, or rather the iPhone 14, are the most sought after products for the middle class customer, who feel more inflation in their pockets.
Traditionally, Q4 is Apple’s biggest revenue period: it launches the iPhone in September, opens the fourth quarter by delivering the devices, picks up Black Friday in November and ends the year with Christmas. If profit was stable in Q3, the end of the year should bring a setback for Apple.
With information: Reuters🇧🇷 forbes🇧🇷 Wall Street Journal and 9to5Mac
https://tecnoblog.net/noticias/2022/12/05/apple-deve-ter-fim-de-ano-fraco-com-problemas-na-china-e-nos-estados-unidos/