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Apple says Coronavirus will hit its revenue, iPhone production hit in China factories

In a quarterly guidance, Apple has given a disclaimer that it may not be able to meet the revenue target for the March quarter because Coronavirus has led to temporary closure of many factories in China.

twitter-logoYasmin Ahmed | February 18, 2020 | Updated 14:03 IST
(Source: Reuters)

Highlights

  • Apple talks of revenue hit due to Coronavirus endemic in China.
  • The spread of virus and its containment measures have led to closure of factories making iPhones.
  • The spread of virus has affected supply of iPhone and that may result in revenue shortfall for the company.

The supply of iPhone may be affected due to Coronavirus or COVID-19, Apple said on Tuesday. In a quarterly investment note, Apple said, "we are experiencing a slower return to normal conditions than we had anticipated." The company gave a disclaimer of sorts saying that it may not able to meet the revenue guidance for the month of March.

The note says that the iPhone supply has been impacted due to Coronavirus, which has led to many factories in China closing temporarily. Some factories that have opened this month after prolonged holidays in China are running at less than optimum capability because not enough workers have joined offices.

Keeping in mind that China is a major hub for the production of iPhones, Apple says the epidemic has affected the production of iPhones.

"Worldwide iPhone supply will be temporarily constrained," the company said in a note posted on its official website. It highlights that all factories that manufacture iPhone are based outside Hubei province, which is the epicentre of the Coronavirus epidemic, but adds that even these factories are ramping up only slowly. The factories were mostly closed in January due to annual holidays in China, holidays that were extended by local authorities in a bid to contain the spread of Coronavirus.

"Even though all the facilities have reopened, they are ramping slowly," Apple said.

While factories are not making enough iPhones, Apple notes that its revenue is also going to be hit by the closure of shops and stores in China. With the outbreak of the epidemic, almost all of the Apple stores, including partner stores, have been closed in most Chinese cities. And even the stores that were earlier open were open only for reduced hours. This largely affected the customer traffic.

Apple in its note also says that it believes the disruption to its business is temporary. "Apple is fundamentally strong, and this disruption to our business is only temporary," says the company.

It adds that health of people is its first priority, and not the revenue. "Our first priority -- now and always -- is the health and safety of our employees, supply chain partners, customers and the communities in which we operate. Our profound gratitude is with those on the front lines of confronting this public health emergency," says the company.

Apple CEO Tim Cook last month said that the company provided an unusually wide revenue forecast of $63-67 billion because of uncertainty about how Coronavirus would affect production. "As you can see from the range, anticipates some level of issue there. Otherwise, we would not have a $4bn range," Cook had said according to news reports.

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