Apple recently announced that it would be scaling back production of the iPhone 14 lineup at Foxconn’s facility in China. While this will impact Foxconn and Apple’s earnings for the upcoming holiday quarter, the move is going to have a limited impact on consumer demand.
Foxconn has scaled back iPhone 14 production, but demand still strong
Apple’s main iPhone assembler Foxconn has been dealing with a COVID-19 outbreak at its Zhengzhou plant in central China. The manufacturer has had to continue production under the Chinese government’s closed-loop production protocols.
Following the news of the outbreak and related issues, Apple announced that it would be reducing the production of the iPhone 14 Pro and iPhone 14 Pro Max models.
In a note to investors (via AppleInsider), Morgan Stanley says that investors should not be concerned about the current situation since it is not a reflection of demand for the iPhone 14. Instead, the situation can be described as a poor set of circumstances with effects that are “fluid.” Therefore, Morgan Stanley claims that ongoing production problems will lead to deferred iPhone demand, which Apple will deal with later.
Wedbush analysts Daniel Ives and John Katsingris recently warned investors to think carefully before selling their Apple shares. “After battling the macro headwinds and delivering a strong September quarter/guidance in a stark contrast to the rest of Big Tech, this latest zero-Covid situation is an absolute gut punch for Apple in its most important holiday quarter,” Wedbush analyst Dan Ives wrote in a note.
Similar to Morgan Stanley, Wedbush says that investors have nothing to be worried about in regard to Apple’s earnings since the issue is not a measure of demand. In addition, the production delays should ease once the COVID outbreak is dealt with.
As of right now, Apple is in talks with iPhone suppliers Pegatron and Luxshare ICT to switch production lines of the iPhone 14 and iPhone 14 Plus to the iPhone 14 Pro and Pro Max. Since demand for the iPhone 14 and iPhone 14 Plus has been lackluster compared to the demand for the iPhone 14 Pro models, it is the most logical move the Cupertino tech giant could make right now.
In related news, it was recently reported that Apple has lost one of its two AirPods Pro 2 suppliers. This means that inventory of the AirPods Pro 2 might not be readily available for the upcoming holiday season