The coronavirus, or COVID-19 as its more formally known, is having a pretty significant impact on the world economy, especially for tech companies like Apple who are heavily dependent on the Chinese supply chain, although as the pandemic spreads to South Korea and other areas around the world, it seems that even those outside of China haven’t been immune from its effects.
We first saw predictions in late January that the coronavirus could be hurting Apple’s supply chain, especially as the outbreak forced major factories in China to shut down completely for over a week, setting back production of some of Apple’s most popular products like AirPods, which need to run a 24/7 manufacturing schedule just to keep up with burgeoning demand.
Even after Foxconn re-opened its plants in mid-February, it found only a fraction of its workers showing up, resulting in further production delays as plants remained short-staffed and unable to operate at full capacity. Further, with travel to China curtailed by the virus, Apple’s Engineering Validation Test (EVT) teams have been unable to move forward with the iPhone 12 development cycle. This could either force Apple to delay the announcement of the new iPhone this fall, or simply accept that it will be in short supply over the first few weeks, making it very difficult for users to get their hands on one.
Then there’s the matter of plummeting sales of current iPhone models in China due to Apple’s own retail stores and most third-party retailers being shut down for most of February, combined with the travel restrictions that have made consumers reluctant to visit them even when they are open.
All of this forced Apple to release a rare guidance adjustment—only the second one in almost 20 years—admitting that it was going to have to adjust the numbers for its second quarter revenue due to the coronavirus outbreak.
In an effort to reassure investors and employees alike, Apple insisted that this was a temporary issue at best, and that the company remains “fundamentally strong,” but it didn’t stop Apple’s stock from taking a big hit as a result of the announcement that it wasn’t going to hit the revenue targets it had originally predicted.
Things Are Slowly Improving
In an interview with Fox Business this week in Birmingham, Alabama, Apple CEO Tim Cook said that he believes that China is “getting the coronavirus under control” and that he’s “very optimistic” that things are going to get back to normal soon.
It feels to me that China is getting the coronavirus under control. I mean you look at the numbers, they’re coming down day by day by day. And so I’m very optimistic there.
Thus far, Fox Business has only shared a clip of the interview, but in that brief segment, Cook notes that almost all factories have reopened and that they’re in the “third phase of getting back to normal.” He also points out that the “iPhone is built everywhere in the world” with key components coming even from the U.S.
Cook’s comments ultimately seem intended to reassure investors at a time when Apple’s stock is suffering and many are fearing a worst-case scenario, but it’s also fair to say that as the CEO of one of the largest companies involved in the Chinese supply chain, more than anybody he has his finger on the pulse of the Chinese economy and what’s happening in that country.
Cook isn’t just pandering to investors here, however. The Wall Street Journal reported earlier this week that the number of new coronavirus cases in China has been dropping, and several provinces have lowered their health-alert levels and begun to ease travel restrictions, which should allow more people to return to work. However, as the same report notes, health authorities are raising alarms about sharp increases in viral infections elsewhere in the world, with outbreaks in places like South Korea, Italy, and Iran, so there’s still a lot of uncertainty as to what the global impact of the virus could be.
The coronavirus has already forced the cancellation of many international conferences, leading to speculation that Apple might even cancel WWDC this year. The full Fox Business interview is scheduled to air today at 12:00 PT, and is expected to include additional comments from Cook on the possibility of the coronavirus outbreak disrupting Apple’s business beyond the company’s second quarter, which ends next month.