Coronavirus drags iPhone shipments to China down 60 percent

Apple had seen a 'doomsday-type' decline in sales out of China because of the coronavirus, said an analyst.

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    The coronavirus outbreak led Apple to temporarily close its stores across China and affected the production of its iPhones in the country [File: Mark Schiefelbein/The Associated Press]
    The coronavirus outbreak led Apple to temporarily close its stores across China and affected the production of its iPhones in the country [File: Mark Schiefelbein/The Associated Press]

    Apple Inc.’s iPhone shipments in China plunged more than 60% in February, when the coronavirus outbreak shut down scores of its stores and hampered key manufacturing partners across its largest international market.

    Shipments of Apple’s marquee device dropped to about 494,600 units from a year earlier, according to Bloomberg calculations based on monthly data from the China Academy of Information and Communications Technology, a government think-tank. Overall mobile phone shipments, including Android devices, slid 56% to 6.4 million units, the academy said. Those year-earlier comparisons were skewed by the fact that the Lunar New Year holidays fell in February of 2019, versus January this year.

    Since erupting in China in January, the Covid-19 epidemic has hit Apple’s supply and demand. Factories resumed work slower than expected and most of its 42 stores lay dormant for weeks, driving home the U.S. giant’s exposure to disruptions in the world’s No. 2 economy. While factories are gradually restarting after enforced quarantine, lingering production bottlenecks risk hurting global iPhone revenue in coming months.

    Apple has seen a “doomsday type” decline in iPhone sales out of China as a result of the coronavirus, though the impact should be short-lived, Wedbush analyst Daniel Ives wrote. But if the outbreak persists into the second quarter, it threatens to hold up the launch of Apple’s fifth-generation capable or 5G iPhones, expected toward the latter half of 2020, UBS analyst Timothy Arcuri wrote.

    What Bloomberg Intelligence Says

    "The decline reflects postponed, not lost, purchases in our view and suggests Apple’s fiscal 2Q China sales may fall by $5.1-$5.6 billion vs. last year, per our analysis," said analysts John Butler and Boyoung Kim.

    Before Monday’s broad market sell-off, Apple had lost $167 billion of its market value since notching a 2020 peak, underscoring the anxiety around the impact of the global epidemic.

    Chief Executive Officer Tim Cook has called the outbreak a challenge. In the past few weeks, his company has warned retail employees about shortages of replacement iPhones, scrapped its quarterly revenue forecast and encouraged staff in Silicon Valley to work from home. It remains unclear how the epidemic will impact longer-term supply: Apple’s primary manufacturing partner, Hon Hai Precision Industry Co., has said its factories in China will be back to normal by the end of the month.

    SOURCE: Bloomberg