Apple (AAPL) shares slipped lower Monday amid concerns that iPhone output from a key factory in China could be curtailed by Beijing’s strict ‘zero Covid’ health policies.
Foxconn, a key Apple assembler responsible for around 70% of the tech giant’s iPhone shipments, said Sunday it is working towards establishing back-up production facilities to compensate for lost output in Zhengzhou, a 200,000-person factory, amid reports of workers fleeing that city’s recent Covid restrictions and suggestions of a surge in onsite infections.
The Taiwan based company, however, stated that reports of 20,000 infections at the Zhengzhou were false.
Reuters reported Monday that November production in Zhengzhou could fall by as much as 30%, with plans for a boost in output in Foxconn’s Shenzen factory to mitigate the slump now underway.
Apple CEO Tim Cook said last week 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.
Apple shares, which has their best single-day session in more than two years Friday, surging more than 7.5%, were marked 0.5% lower in pre-market trading to indicate an opening bell price of $154.97 each.
Last week, Apple said iPhone revenues rose 9.6% from last year to $42.62 billion over the three months ending in September, missing the $43.2 billion Street forecast. Overall revenues, however, rose 2% from last year to an all-time high of $90.15 billion, helping Apple to a better-than-expected four 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.