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People walk near a display advertising Apple’s iPhone 14 outside its store in Shanghai on November 7, 2022. Photo: Reuters

Apple’s Tim Cook blames supply disruption from China’s pandemic controls for revenue drop

  • ‘Covid-19 challenges … significantly impacted’ iPhone supplies, the CEO said, after the world’s largest iPhone factory faced protests last year
  • Apple’s fourth quarter revenue fell for the first time since early 2019, which Cook also blamed on a strong dollar and economic challenges
Apple chief executive Tim Cook on Thursday said that manufacturing disruptions in November and December contributed to its first quarterly decline in revenue since early 2019, in an apparent reference to the unrest late last year at the world’s largest iPhone factory in central China in response to Beijing’s rigid pandemic restrictions.

“Covid-19 challenges … significantly impacted the supply of iPhone 14 Pro and iPhone 14 Pro Max and lasted through most of December,” Cook said during an earnings call, citing a November notice that the company put up warning that restrictions forced its major iPhone factory in the city of Zhengzhou to operate “at significantly reduced capacity”.

But “production is now back where we want it to be”, he added.

Apple tops China’s fourth-quarter smartphone sales amid weak market demand

Apple on Thursday reported US$117 billion in revenue for the quarter ended December, down 5 per cent from a year earlier. Profit tumbled 13.4 per cent to US$30 billion.

“Foreign exchange headwinds” amid a strong dollar and “a challenging macroeconomic environment” also weighed on earnings, Cook said.

Another factor was weak demand in China, where the company saw a 7 per cent decline in sales amid Covid-19 restrictions, according to Cook. Once those controls were relaxed, there was a “marked change in traffic in our stores”, he said.

Sales in Greater China – which includes Hong Kong, Macau and Taiwan but which mostly come from the mainland – were down to US$23.9 billion for the quarter.

In India, the company “set a quarterly revenue record” with growth in the “strong double digits”, Cook said, without specifying numbers.

The South Asian nation is a “hugely exciting” market, he said, and Apple is putting “a lot emphasis” on it. The iPhone maker launched an online store in the country in 2020, with bricks-and-mortar shops opening “soon”, according to Cook.


iPhone 14 delays expected after days of violent protests at Foxconn Zhengzhou factory

iPhone 14 delays expected after days of violent protests at Foxconn Zhengzhou factory
Apple has also been expanding its manufacturing capacity in the country, where it is ramping up iPhone production. The company’s major product manufacturer Foxconn Technology Group, formally known as Hon Hai Precision Industry, in December injected US$500 million into its Indian subsidiary.
India is expected to assemble as much as half of the world’s iPhones by 2027, according to a forecast by Taiwan-based DigiTimes Research. That would be a significant increase from the 5 per cent currently assembled in the country. JPMorgan estimated in September that India would be making a quarter of all iPhones by 2025.

Cook confirmed in the earning call Apple’s plans to continue to diversify the iPhone supply chain. “There are component parts coming from many different countries in the world, and the final assembly coming from three countries in the world on just iPhone,” he said. “We’ll continue to optimise it over time.”

Shares of Apple closed up 3.71 per cent to US$150.82 on the Nasdaq on Thursday.