Foxconn, Apple’s most-important supplier, cautioned Thursday that Covid-linked shutdowns in China will trim December quarter sales.
Apple (AAPL) – Get Free Report supplier Foxconn said Thursday that it will adjust its production capacity in China and elsewhere to ensure that Covid-linked shutdowns have a minimal impact on its holiday quarter revenue forecasts.
Taiwan-based Foxconn, a key Apple assembler responsible for around 70% of the tech giant’s iPhone shipments, posted weaker-than-expected third quarter profits of T$38.8 billion ($1.22 billion), and said December quarter smartphone revenues would likely decline on year-on-year basis amid disruptions linked to its China-based manufacturing hubs.
Earlier this week, Apple said that Foxconn’s 200,000-person factory in Zhengzhou known as ‘iPhone City’ is “currently operating at significantly reduced capacity” owing to covid restrictions put in place last month by officials in Beijing and warned that it could curtail shipments of its higher-end iPhones heading into the holiday season.
“We will definitely work all out to adjust our production capacity and output, so there is no impact on demand for (the Christmas and Lunar New Year) holidays,” Foxconn chairman Liu Young-way told investors on a conference call Thursday.
Apple shares were marked 0.87% higher in pre-market trading to indicate an opening bell price of $134.87 each, a move that would trim the stock’s one-month decline to around 4%.
Apple CEO Tim Cook said last month that iPhone demand has remained healthy, but noted that supply constraints for both the 14 Pro and the 14 Pro Max continued to persist heading into the key holiday season, even prior to the added restrictions at Zhengzhou.
Still, Bloomberg reported earlier this week that Apple will produce 3 million few iPhone 14s than first anticipated, trimming its full-year target to 87 million, amid fading demand.
KeyBanc Capital markets, meanwhile, published data yesterday that indicted a pullback in U.S. spending on Apple hardware, adding that the supply chain disruptions would push iPhone sales into its March quarter.
iPhone revenues, in fact, were an important component of Apple’s better-than-expected September quarter earnings, with sales rising 9.6% from last year to $42.62 billion.
Overall revenues, however, rose 2% from last year to an all-time high of $90.15 billion, helping Apple to a Street-beating fourth quarter earnings tally of $1.29 per share.
“We did better than we anticipated, in spite of the fact that foreign exchange was a significant negative for us,” CFO Luca Maestri said, noting that December quarter sales would suffer a a 10 percentage point year-on-year impact from the surging U.S. dollar.
The world’s biggest tech company also said holiday quarter revenues would slow from September levels, citing in part a 10 percentage point year-on-year impact from the surging U.S. dollar, which is trading near 20-year highs against its global peers.