Apple (AAPL) – Get Free Report shares edged lower Wednesday following reports of protests by workers over pay and conditions at its key iPhone factory in China and ongoing supply-chain challenges linked to Beijing’s strict Covid policies.
Hundreds of workers were filmed in protest outside the Zhengzhou-based plant known as ‘iPhone City’, with some smashing windows and tearing down barricades, amid accusations of delayed bonus payments and dangerous working conditions linked to an earlier Covid outbreak.
Foxconn, the world’s biggest iPhone assembler and operator of the Zhengzhou plant, denied the allegations, adding it’s working with Chinese authorities to ensure security.
Reuters reported that activity at the plant was not affected, but output remains below typical holiday-season levels as management struggles to operate it’s ‘closed loop’ strategy amid rising Covid infections and stricter curbs on movement from city officials.
Covid infections in China have risen past 29,000, the highest since April, casting further doubt on any near-term ‘pivot’ in health policy from President Xi Jinping.
Earlier this month, Apple cautioned that Covid restrictions at the 200,000-person plant would curtail shipments of its higher-end iPhones heading into the holiday season in most of its global markets. Foxconn itself said on November 10 that it will adjust its production capacity in China and elsewhere to ensure that Covid-linked shutdowns have a minimal impact, but noted that December quarter smartphone revenues would likely decline on year-on-year basis nonetheless.
The South China Morning Post reported Monday that some China-based customers will need to wait until January 3 for the delivery of iPhone 14 Pro and Pro Max models. That’s two weeks longer than for orders made in early October. China accounts for around 15% of Apple’s overall iPhone sales.
Apple shares were marked 0.35% lower in pre-market trading to indicate an opening bell price of $149.67 each.
Apple CEO Tim Cook said last month that iPhone demand has remained healthy, but noted that supply constraints for both the 14 Pro and the 14 Pro Max continued to persist heading into the key holiday season, even prior to the added restrictions at Zhengzhou.
iPhone revenues, in fact, were an important component of Apple’s better-than-expected September quarter earnings, with sales rising 9.6% from last year to $42.62 billion.
Overall revenues, however, rose 2% from last year to an all-time high of $90.15 billion, helping Apple to a Street-beating fourth quarter earnings tally of $1.29 per share.
“We did better than we anticipated, in spite of the fact that foreign exchange was a significant negative for us,” CFO Luca Maestri said, noting that December quarter sales would suffer a a 10 percentage point year-on-year impact from the surging U.S. dollar.
The world’s biggest tech company also said holiday quarter revenues would slow from September levels, citing in part a 10 percentage point year-on-year impact from the surging U.S. dollar, which is trading near 20-year highs against its global peers.
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