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Apple’s China Factories Restart Production But Cloud Hovers Over Demand

Apple’s China Factories Restart Production But Cloud Hovers Over Demand
With the slow but assured opening up of China following a severe lockdown, iPhone factories of the suppliers of Apple are mostly back in operations. However the question that the United States based tech giant is currently facing is how many people would be willing to purchase the older as well as the newer models of the iPhones given the rapid and the deadly spread of the coronavirus pandemic all across the rest of the world apart from China which has now apparently come out of the pandemic.
There is likely to be a drop of 18 per cent year-on-year in the orders for iPhones  from Apple for the quarter ending March, said a report quoting  a  senior official at one of Apple's major contract assemblers. The assembler has postponed ramping up production lines for the manufacturing of the next generation of new phones that work with 5G networks, said reports, even though there is still the possibility the Apple could launch its new 5G enabled phones in the fall this year.
"No one is talking about manpower or material shortage (in China) anymore. Now everyone is looking at whether demand from U.S. and Europe could keep up," the source in Apple’s major contract assemblers was quoted in the media as saying. "The focus now is the demand from consumers in the U.S. and Europe."
According to reports, preparathions for a similar level of contraction are being taken by one of Apple's key display suppliers. The supplier is now anticipating a 17 per cent drop in possible shipments for the current year of iPhone display units to 58 million units compared ot the company’s original estimates for the year at 70 million displays.
Reduction of the people working at the production line that makes display units for Apple in a Vietnam factory is also being planned by the supplier. The Vietnam factory assembles the displays and they are then shipped to China to be fitted into iPhones.
There has been no comment available from Apple on the issue.
While Apple started reopening its stores in China, it started to close down all of its stores in the rest of the world earlier this month. It is difficult top predict when the demand for iPhones would pick up again because much of Europe and the United States is under a lockdown.
And since supply china countries such as Malaysia and Vietnam are now imposing restrictions to combat the coronavirus pandemic, apple could still face further disruptions in its supply chain.
"Things are changing on a day by day basis due to supply chain disruptions, so it is difficult to craft any meaningful comment at the moment about both supply and demand," said an official at one supplier in Malaysia as quoted in a report.
The coronavirus pandemic in China had forced Apple in January to bring down its sale forecasts for the first quarter ending March and did not provide any guidance. Since the beginning of the year, iPhone sales have dropped by more than 15 per cent globally.
"Our base case scenario assumes a shock to June quarter demand with steadily improving results" in the second half of the year rather than a "V-shaped" recovery, Canaccord Genuity analyst Michael Walkley wrote in a note to investors on March 18.

Christopher J. Mitchell

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