How ‘iPhone city’ riots affect Apple stock? Analysts see a ‘body blow’ for the most valuable company on earth
Hundreds of workers at the world’s largest iPhone factory in Zhengzhou, China protest strict no-COVID policy, poor working conditionsand wrong management contract on Wednesday — and analysts warn that could be a “blow” to [hotlink]Apple[/hotlink].
Videos posted on social media show violent clash between the government and employees of Foxconn, a contract assembler that makes iPhones. The protests are an escalation of tensions that underscore the growing disagreement with the government. living condition at factories across China during COVID.
Since October 13, about 200,000 Foxconn workers have worked under the regime closed loop systemwhere employees work and live full-time onsite to maintain production and avoid the spread of COVID.
Despite these efforts, inherently angry workersApple warned production of the iPhone 14 Pro and other high-end models will be lower than expected after significant production cuts at the Foxconn plant in Zhengzhou — and that was before the latest protests.
This is not the first time workers at an Apple supplier in China have protested amid strict COVID-19 restrictions and poor working conditions this year. In May, hundreds of workers at an Apple supplier called [hotlink]quantum computer[/hotlink] scuffle with the guard and overcome isolation barriers following a two-month COVID lockdown and salary disputes.
Wedbush tech analyst Dan Ives said the lockdowns and protests in China this year were a “big blow to Apple” that caused the number of iPhone 14s available for sale to drop by 5%, causing the company to fall into a state of “severe shortage”. enter the holiday season.
And Ives fears the situation could worsen after the latest protests.
“If Zhengzhou remains at a lower capacity for the next few weeks and continues to see increased unrest with workers, then this will obviously cause a major iPhone Pro shortage over the next few weeks. Christmas time is extremely important, especially in the US,” he wrote in a Wednesday note.
iPhone shortages are a big concern for Apple, as about 52% of the company’s fiscal 2022 revenue comes from iPhone sales alone. SEC filings.
“This latest Covid-free situation is a blow to Apple during its most important holiday quarter,” Ives wrote.
Despite the protests in China, Apple stock was flat on Wednesday. The big tech giant, that is most profitable Luck 500 companies in 2021, has recovered better than most other big tech companies this year, but its shares are still down about 17% year-to-date on recession fears Attachment.
Apple did not respond LuckAsk for comment on iPhone protests or disruptions.
Mark Haefele, chief investment officer at UBS Global Wealth Management, also warned investors on Wednesday that production disruptions due to recent protests and uncertainty over COVID policies “add further operational difficulties” for companies like Apple.
“Despite its relatively small size relative to the size of the workforce, the disruption occurred at a time of peak demand in Western markets,” Hafele wrote in a research note Wednesday. with Apple previously warning of lower premium handset shipments due to previous disruptions.”
And Deutsche Bank’s Jim Reid also warned on Wednesday that China’s COVID-free stance took “a new turn for the worse” this week, noting that restrictions in many provinces had “increased up” as the number of infections steadily increased.
That means more lockdowns could be on the way, which is bad news for Apple.
China report First death from COVID for more than six months this week as daily cases continue to rise. More than 253,000 COVID cases have been found across China in the past three weeks, government officials report Tuesday.
This story was originally featured on Fortune.com
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