Apple has released an unusual update on its future revenues, in which it warns investors and shareholders about a change in its financial results forecasts this quarter due to the effects of the new coronavirus (SARS-CoV-2). It is rare for the company – among the richest in the world – to publish updates on its financial performance before the quarterly data, in which it provides information on the revenues and sales trends of its products.
The health crisis in China has led to a slowdown in the production of iPhones, the most profitable product for Apple, which now foresees delivery delays and a shortage for some time of its smartphones in physical and online stores.
Since the beginning of the year, the new coronavirus has resulted in the quarantine of entire cities in China, with tens of millions of people forced to remain in their homes. The effect of isolation has been reflected in the production capacity of numerous industrial districts, where products of all kinds are produced and are also used in the West.
For several weeks, the Chinese factories that produce the iPhones have stood still, or have been working at a much slower pace than usual. Things have improved in recent weeks, but in its update, Apple explains that the recovery is happening “slower than we anticipated.” This means that the company can count on lower production, which will lead to “shortages in the supply of iPhones” and a consequent reduction in global revenues.
It is unclear whether the problems related to the new coronavirus will also complicate Apple's announcement of new products. In late January, Bloomberg reported that the company was working on a new iPhone that was less expensive than current models, which would be announced in March.
As always happens in these cases, the news was neither denied nor confirmed by Apple, but considering the sources used by Bloomberg it seemed to be certain. The difficulties in China could now lead to a delay in the announcement of the new phone, as well as announcements of other highly anticipated products, such as the new iPad Pro.
However, the lower revenues expected by Apple are not only linked to the slowdowns in the production chain, but also to lower sales in China. As a precaution, following the spread of news about the new coronavirus, the company has closed some of its main stores in Chinese cities for weeks, as have all the major shopping centers and authorized retailers of its products. China is an important source of revenue for Apple, and as such, lower sales will be reflected in the company's upcoming financials.
In recent weeks, Apple has however tried to contain the problem, planning the reopening of some stores and increasing the production of iPhones and other products elsewhere, such as India. However, its chief executive, Tim Cook, explained in a letter to staff that the priority is to make sure that all employees can work safely and that their health concerns are prioritized over production needs.
Letters of this type are often written knowing that they will then be disseminated unofficially even outside the company (in this case it was published by Bloomberg on its website).
It is estimated that over 72,000 people have contracted the new coronavirus since the beginning of the year, and that at least 1,800 of these have died. According to analysts, the health crisis will have several repercussions in the manufacturing sector and in the coming weeks several other companies will do like Apple, spreading updates to revise their sales and revenue forecasts.
Companies such as Nike, Starbucks and IKEA, which had invested heavily in China in recent years, have had to keep many of their stores closed, with inevitable repercussions on their revenues. All major Western airlines have also suspended their flights to and from China, with consequences for their budgets that will become tangible over the next few months.
