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Feb 24, 2020

Apple supply chain snag to last at least a month: Wedbush

Apple's sales target warning is 'prudent' amid coronavirus fallout


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Apple Inc.’s supply chain, which is heavily reliant on China, will probably take more than a month to get back to full capacity at the earliest amid disruptions caused by the coronavirus, according to Wedbush analyst Daniel Ives.

Even in a best-case scenario, the iPhone maker’s supply chain won’t be fully functional until early April as workers at Apple’s manufacturing partners return to work in China, Ives wrote in a research note. The disruptions could last until as late as June in a worst case scenario that would probably delay Apple’s fall iPhone release by months, he said.

“All the Street’s focus is on the supply chain and gauging when some form of normalization begins around iPhone production throughout China,” Ives wrote in a research note.

Last week, Apple warned it wouldn’t achieve its revenue forecast for the current quarter due to work slowdowns and sagging demand for its products in China, where the virus has infected more than 70,000 people. Reports of new clusters of cases in Italy and Iran sent stocks around the world tumbling on Monday. Cupertino, California-based Apple fell as much as 7.6 5.4 per cent before paring some of the losses, while semiconductor stocks dropped 5.4 per cent.

If Apple’s supply chain gets back to normal by April, the company’s lower priced iPhone may be delayed by several weeks in the spring, but the 5G iPhone release in the fall would probably be unaffected, said Ives, who has an outperform rating on the stock. If slower production lasts until June, both iPhone release dates could be pushed out by months, he said.

Ives’s base case calls for full production resuming by late April or early May, which would delay the fall iPhones by a few weeks and the lower cost devices by about two months.