Apple’s Big Problem Gets Bigger

news7f10/31/2022

6 3 minutes read

Apple (AAPL) has been one of the big surprises of the current quarterly earnings season so far.

The iPhone and iPad maker managed to stifle its most optimistic forecasts for the quarter ended September 30.

Apple said earnings for the three months ended September, the company’s fourth fiscal quarter, were pegged at $1.29, up 4% year-over-year. Apple said that group revenue rose 2% year over year to an all-time high of $90.15 billion, well ahead of analysts’ estimates of $88.9 billion.

The company said on October 27 that iPhone revenue grew 9.6% year over year to $42.62 billion. Sales in China, one of the largest markets, increased 6.25% to $15.47 billion. Mac net sales rose 25% to $11.51 billion, while sales of wearables, home and accessories, including the Apple Watch, rose 9.8% to $9.65 billion.

Featured Apple

These results are proof that Apple is unaffected by the ongoing recession. Investors had feared that, like the rest of the tech industry, the Cupertino giant would be hurt by a drop in consumer purchases. Consumers affected by inflationary highest in 40 years.

This inflation that central banks are battling in the West with aggressive rate hikes could push the economy into recession. Depression, economists and business leaders have warned. As a result, there is concern that consumers will delay their planned purchases of technology products.

For example, investors fear that consumers will give up their desire to exchange for new iPhones in better days. In addition, Microsoft (MSFT) Alphabet (GOOGLE) Amazon (AMZN) and the Meta . Platform (META) Apple’s rivals have previously signaled that the economic downturn is affecting them.

But CEO Tim Cook hinted last week that Apple is playing in a league of its own.

“iPhone grew 10% in Q4 to $42.6 billion,” Cook reminded analysts during the earnings call. “Customer demand was strong and better than we anticipated.”

There was, however, a problem, he later added: supply.

“As for the new products, 14 and 14 Pro and Pro Max, it’s still early days. But from the beginning we were restricted to 14 Pro and 14 Pro Max and we continue to be limited to this day. , ” said the CEO.

“And so we’re working very hard to meet demand. It’s hard to say what the combination will be like until we can meet demand because we can’t define the combination. accurate until then. But we’re working very hard to do it.”

Cook added that the Apple Watch also has a supply problem.

“Ultra is – supply constrained and will continue to be constrained this quarter,” Cook said.

New outbreak of Covid in China

It looks like meeting demand will be more complicated than expected as a case of covid-19 has just been detected at a Foxconn factory in China. Foxconn is one of Apple’s biggest suppliers. China has a zero-covid policy that disrupts the supply chain.

Videos on social media showed people, believed to be employees of the Foxconn factory in Zhengzhou city, central China, jumping the company fence to get home.

Stephen McDonell, BBC journalist, posted several videos.

Currently, Foxconn has not said how many cases of covid-19 have been detected in the factory. The company has 200,000 employees at the Zhengzhou complex.

Last week, nearly 200 cases of covid were reported in Zhengzhou, the capital of Henan province, which has a population of more than 10 million.

According to Reuters, a partial lockdown has been decided.

Foxconn said Sunday that it will not prevent employees from leaving. It told media that it is maintaining “normal production” as the company speeds up production of the iPhone 14.

“The government has agreed to continue serving meals in-house to improve convenience and employee life satisfaction,” said Foxconn.

And for those who want to go home, Foxconn “is working with the government to organize personnel and facilities to provide an orderly return service to employees starting today.”