Coronavirus Outbreak May Disrupt iPhone Production – Report

Apple’s efforts to ramp up its iPhone production by 10 percent could be impacted by the deadly coronavirus outbreak, which has so far killed 106 people in China.

According to the Nikkei Asian Review on Tuesday, Apple’s 10 percent iPhone production increase faces “massive uncertainties”due to the outbreak which has infected over 4,500 people in China,.

Last August Apple rival Google reportedly developed plans to move production of its Pixel smartphones away from the Chinese mainland, and instead make them in Vietnam. That move came amid the trade war between the United States and China.

Coronavirus outbreak

But now with China in the grips of the coronavirus outbreak, production of Apple handsets could be impacted.

Apple had reportedly asked its suppliers to make up to 80 million iPhones over the first half of this year, people familiar with its planning told the Nikkei Asian Review. This is a rise of over 10 percent on last year’s production schedule.

The iPad maker is expected to produce its fourth-quarter results late Tuesday, has booked orders for up to 65 million of its older iPhones, mostly from the iPhone 11 series, and up to 15 million units of a new cut-price model that it plans to unveil in March.

Apple ordered some 73 million iPhones over the same period last year, GF Securities data reportedly indicated.

“This year is much busier than last year,” an industry source was quoted as saying by Nikkei AR.

But suppliers are warning that due to the outbreak of the coronavirus in China’s Hubei Province (Apple’s suppliers main manufacturing centres are located in nearby Henan and Guangdong provinces), the production increase may be impacted.

“The [coronavirus] situation in China could affect the planned production schedule,” one supply chain executive, whose trip to China has been postponed due to the virus, told Nikkei.

Hubei Province is currently in lockdown, as is the city of Wuhan (the epicentre of the outbreak), with strict transport restrictions in and out of the area. And it seems that wearing face masks in public is now mandatory in some Chinese cities.

Cheaper iPhones

Apple is seeking to aggressively ramp up iPhone production, after it was reported last week that it is readying a new budget-conscious pricing strategy to boost sales in emerging markets.

This is a change in strategy for the iPad maker, and comes after Apple’s main money maker (the iPhone) suffered two consecutive quarters of decline in the first half of 2019.

CEO Tim Cook has previously acknowledged “price is a factor.”

So Apple is looking to widen its budget friendly offerings to appeal to a bigger audience with the arrival of 5G networks around the world.

But suppliers are worried.

Last week Terry Gou, founder of Foxconn, which trades as Hon Hai Precision Industry, reportedly said that he was extremely concerned about the virus, and warned that its rapid spread, abetted by mass travel during the Lunar New Year, could disrupt supply chains.

“We are considering whether or not to let employees return to China after the Lunar New Year holidays,” Gou told a news conference last week in Taipei.

Apple has reportedly denied to comment.

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