Apple to miss sales target due to coronavirus epidemic

Apple is likely to miss its March quarter sales target as the iPhone maker has become one of the biggest corporate casualties of China’s coronavirus epidemic.
Apple store
The spreading virus has killed nearly 1,900 in China and stricken some 72,000 people, confining millions to their homes, disrupting supply chains and delaying reopening of factories after the extended Lunar New Year holiday break, Reuters reported.

Manufacturing facilities in China that produce Apple’s iPhone and other electronics have begun to reopen, but they are ramping up more slowly than expected, Apple said. That will mean fewer iPhones available for sale around the world, making Apple one of the largest Western firms to be hurt by the outbreak.

Some of its retail stores in the country remain closed or are operating at reduced hours, which will hurt sales this quarter. China accounted for 15 percent of Apple’s revenue, or $13.6 billion, last quarter, and supplied 18 percent of revenue in the year-ago quarter.

In late January, Apple had forecast $63 billion to $67 billion in revenue for the quarter ending in March. Apple did not offer a new revenue estimate nor provide a profit forecast on Monday.

Apple says demand for iPhones is also down in China because many of Apple’s 42 retail stores, there are closed or operating with reduced hours. China is Apple’s third-largest retail market for iPhones, after the US and Europe.

Outside China, Apple said iPhone demand has been strong and is in line with the company’s expectations.

Apple said it will reopen China stores as steadily and safely as we can, while global supplies of iPhones will be limited as manufacturers work toward operating plants at full capacity. It plans to provide more information in April, when it releases first-quarter results.

The disruption follows a strong December quarter for iPhone sales, which were up for the first time in a year. That could provide an opening for mobile phone rival Samsung, which has invested in manufacturing capacity in Vietnam and elsewhere.

Samsung launched smartphone delivery services for customers to test its new products this week, as the spread of the virus has prompted the South Korean firm to cancel promotional events and brace for weak store sales.

Apple’s contract manufacturers have added far more locations inside China than outside, with major supplier Foxconn expanding from 19 locations in 2015 to 29 in 2019 and another supplier, Pegatron, going from eight to 12 locations, according to data from Apple.

In contrast, Samsung had signaled early in the U.S.-China trade war that it could meet U.S mobile phone demand without China production. Samsung is also far less exposed to China as an end market.