Counting the Billions as Apple’s Covid Costs Keep Climbing
Some of the lost sales in recent years may have been recouped, but the latest factory upheaval shows there’s no end in sight to the challenges facing the iPhone maker.
Travelers at Zhengzhou’s railway station during the recent lockdown.
Photographer: Shang Ji/Feature China/Future Publishing/Getty
Almost three years after a mysterious new virus emerged from Wuhan in central China, the world’s largest company is still getting hit by mounting expenses and lost supply at its manufacturing heartland. The impact on Apple Inc. of these ongoing protests may now have climbed as high as $41 billion, based on Bloomberg Opinion analysis.
Apple could miss out on production of as many as 6 million units of its premium iPhone 14 Pro models this quarter because of interruptions at a factory in Zhengzhou, Bloomberg News reported Monday, citing a person familiar with the situation. The iPhone Pro sells for as low as $999 while the Pro Max, with a larger screen, runs from $1,099 to $1,599. Assuming prices at the lower end, that may wipe $6 billion to $7.2 billion off Apple’s sales for the peak December period.1 A production shortfall at the top end of that band could make this the most heavily impacted quarter since the pandemic spread across the world in early 2020. (This analysis is based on public statements made by Apple in earnings calls over the past three years where executives have given specific numbers, or ranges, for the cost of supply constraints.)
Apple has yet to release a tally on the latest disruptions. “Covid-19 restrictions have temporarily impacted the primary iPhone 14 Pro and iPhone 14 Pro Max assembly facility located in Zhengzhou, China,” Apple said on Nov. 6 without providing further data. Apple didn’t immediately respond to requests from Bloomberg Opinion on the costs or impact from the incidents. Taiwan’s Foxconn Technology Group, the contractor that runs the factory, declined to comment.
The upheaval caused by Covid lockdowns and poor labor management at the facility operated by Apple’s most important contractor comes at a time of broader protests against the country’s strict anti-pandemic policies. Chinese leader Xi Jinping is caught between holding fast on his strict control measures, and easing up in order to allow the economy and its citizens to flow more freely.
Further lockdowns, brought by a government in Beijing intent on containing Covid at all costs, could exacerbate the challenges and increase the scale of lost manufacturing, Bloomberg News wrote. Last month, workers were seen fleeing the factory amid stiff curbs on movement, food shortages, and the fear of catching the virus.