Apple : China’s Covid Situation is Already Showing Up in iPhone Lead Times

By Senad Karaahmetovic

A few days ago, Reuters reported that the production of Apple’s (NASDAQ:) iPhones could fall by as much as 30% at one of Foxconn’s (TW:) biggest factories in November amid tightening COVID-19 curbs in China.

Apple’s biggest iPhone supplier was working to increase the production output at other factories, including at its Shenzen factory, to mitigate the impact of the limited capacity in its main Zhengzhou plant.

A separate report from yesterday noted that the Zhengzhou Airport Economy Zone, which hosts the world’s largest assembly plant for Apple’s iPhones, is due to be closed for 7 days.

Foxconn’s spokesperson told CNBC that operation and production at its Zhengzhou facility are “relatively stable with health and safety measures for employees being maintained.”

Morgan Stanley analysts said the impact of the COVID situation in Zhengzhou is already “showing up in iPhone lead times, as iPhone 14 Pro and Pro Max lead times have elongated by ~7 days in the last week, to 26 days as of Tuesday, November 1st.”

“We continue to monitor lead times and data/commentary out of China closely to evaluate the potential impact of COVID in Zhengzhou and expect Hon Hai to provide an update on the situation when it reports October revenue later this week. For reference, we forecast 84.5M iPhone shipments in the December quarter,2-3M units below the 87.6M shipments implied by our Greater China Hardware team’s 85M builds,” they told clients in a note.

Bank of America analysts also noted that lockdowns “pose increased headwinds to production,” although Foxconn should be able to mitigate the impact. The longer lead times also hint that Apple is experiencing “some supply disruption,” which is believed to be manageable.

“In particular, we note that the time from order to ship has elongated by roughly one week for the 14 Pro and 14 Pro-Max models, from 18 days to 25 days across most countries including China, Japan, UK, Germany, France and Australia. Maintain Neutral on balanced risk-reward,” the BofA analysts said in a note.

Apple shares are down a further 1.5% in pre-open Thursday.