12/11/22: Apple faces delay

What happened?

- Big Tech giant Apple, has issued a warning stating that customers should expect delays for their new models, such as the iPhone 14 Pro and the iPhone 14 Pro Max.

- This comes after Covid-19 restrictions were placed on Zhengzhou facility in China, after concerns about Covid-19 in the surrounding area. The facility is run by Foxconn, one of Apple's biggest suppliers.

Image Courtesy of Tyler Lastovich, Pexels

Why have I chosen this story?

I've been hearing about the Big Tech industry in the news a lot lately, so I thought it would be interesting to look into this story and learn some new information.

Apple is a well known brand, so when a problem arises, my interest comes. I have an iPhone and I have had a positive experience with the brand so far. Earlier in the year, my iPhone 12 was stolen (broad daylight in central London) and a month later I found out, through 'Find My iPhone' that it was all the way in a Province in China...:/

Some background information:

Foxconn was established in 1974 by Terry Gou, who was also the former chairman of the company. Its headquarters are in Taiwan. The company manufactures electronic products for many companies around the world. Notable products manufactured by Foxconn include major brands, such as the iPhone, Nintendo, Kindle and Sony. According to this source, the plant employs around 200,000 people.

Image courtesy of Reuters.com

Apple currently stands as the world's most valuable company, and is currently worth about $2.38 trillion. Trillion. Wow. According to analysts from a Morgan Stanley report, around 60% of Foxconn's iPhone assembly happens in the facility.

The Chinese government is standing firm in their 'Zero-Covid' approach to tackling the issue. It has seen many provinces go on lockdown, even for the slightest rise in cases. Their tough approach has affected the Chinese economy and will continue to do so, until it comes to an end.

Possible factors:

- Their 'Zero-Covid' policy. It has been criticised by many, but the Chinese government seem to be standing firm in their belief that it is the best way to tackle the problem. Even though China has eased some pandemic policies, they are still keeping in line with their method. Investors were pleased at the announcement, and it even sent Hong Kong's stock market rising by almost 8%.

Image Courtesy of Anna Shvets, Pexels

Analysis (S.W.O.T):

S- I mean delays are never a good thing... Hopefully things will start operating smoothly soon. If we focus on possible future strengths for both companies however, Foxconn seem to be making moves amid the disruption. Over the next 2 years, Foxconn plan to quadruple the workforce at its iPhone factory in India (by adding 53,000 more workers). More

W- Over 60% of the iPhone's assembly is done in this province. If something negative happens to the facility, then it's certain that Apple will take a direct, which is what will happen. In a broader sense, it goes to show how much Apple actually relies on China. The delay will affect their Q4 earnings, but it should pan out once operations are back on track.

O- Will this issue cause Apple to re-think who they do business with and where they do it? China and the US aren't best friends right now...Will it cause Apple to shift more of their production and manufacturing in-house? If so, it could benefit Apple since they would have more control over the operations.

Image Courtesy of Lara Jameson, Pexels

T- Who knows how long the Chinese government plans to stick by their Zero-Covid approach? With newly elected President Xi Jinping adamant on this approach and on for another third term, there seems to be no end in sight. If lockdowns in China continue to occur, not only will China continue to shoot themselves in the foot (the lockdowns are affecting the Chinese economy too), but they will continue to affect other nations and firms that rely on them, like for supply, for example.

Image Courtesy of DW.com

My thoughts:

I think this is perfect timing...the fact that the global economy is also facing high inflation and interest rates, war in Ukraine, the possibility of a recession too...yikes. I think this will be a blip in the road that will have some negative consequences. Lockdowns in China have been noted to last for weeks, and in some cases, months. It also comes amid a time where many Big Tech firms such as Microsoft, Snapchat and Amazon for example, have reported weaker than expected earnings reports. Even though Apple managed to report earnings above analysts' expectations, the delay will inevitably affect their next and possibly even future earnings report.

That's it for this week's edition! I'd love to know your thoughts on the story, you can send me a message on any of my social media platforms or email me at: thelegalchristian@hotmail.com

Have a fantastic week!