Apple’s “dangerous” and “machine” under the outbreak: or narrowing the 5G lag gap

Beijing time february 13 news, in order to overcome the new coronavirus outbreak at an early date, to protect the health of the people, in addition to extending the Spring Festival holiday, the government also advocated in addition to medical supplies and related to the people’s daily life in the industry to postpone the resumption of work. As of 1500 hours on 13 February, there were 59,888 confirmed cases of new coronary pneumonia outbreak, 16,067 suspected cases, 5947 cures and 1368 deaths.

Despite some positive developments, the situation remains critical and Apple and its supply chain’s Chinese operations are inevitably affected.

The outbreak is still in development.

Apple supply chain concentrated in mainland China

Apple’s upstream industry continues to be concentrated in mainland China, with an increase in the number of core suppliers in the mainland/Hong Kong region. In 2019, China/Hong Kong accounted for 40 of Apple’s top 200 core suppliers, six more than in 2018, surpassing Japan for the first time and second only to the United States, behind Taiwan.

Of the 25 companies that are new to the core suppliers, 9 are from the mainland/Hong Kong region, with the number of new finalists coming in first place. Of the 25 companies that failed to select core suppliers, only three are in mainland China/Hong Kong.

Share of mainland factories in Apple’s supply chain

In terms of the number of Apple supply chain factories, the mainland continues to increase, the proportion of rising. In 2019, 383 of Apple’s 807 factories in the supply chain were located in the mainland, an increase of 27 from 2018, and the mainland’s share increased from 44.9% in 2015 to 47.5%. Thus, the position of China’s industrial chain in Apple’s supply chain is on the rise.

Canalys, a market research firm, expects China’s smartphone shipments to fall 50 percent in the first quarter from a year earlier, while IDC expects a 30 percent decline, Reuters reported.

Global smartphone production will fall 12 percent to 275 million units in March, a five-year low, market research firm TrendForce said Monday. It also cut its iPhone production forecast by 10 per cent to 41m units and Huawei’s mobile phone production forecast by 15 per cent to 42.5m. Production forecasts were revised down 3 percent to 71.5 million units due to Samsung’s relatively small impact from the outbreak at its main production base in Vietnam.

What’s the impact of the new corona pneumonia outbreak on Foxconn?

According to early media reports, Foxconn said it had taken steps to reduce the impact of the outbreak on its business. As of January 28, Foxconn still expects to complete all orders. Foxconn did not disclose details, but believes its response is adequate and will not cause a delay in shipments.

As the outbreak unfolded, the government called on people to stay at home, minimise gatherings and asked factories to delay the resumption of work, meaning that, like thousands of other factories, Foxconn would delay the resumption of work. Foxconn had applied to the government to allow it to resume work on February 3rd, but it was not approved because of the severity of the epidemic.

As of February 10, only 10% of Foxconn’s Zhengzhou plant had returned to work. More Foxconn employees are expected to return to work in the coming days as the epidemic situation improves.

Foxconn hopes to have at least 50 per cent of its return to work by the end of February, far later than previously expected. Liu Yangwei, Foxconn’s chairman, hopes the company’s capacity will return to 80 per cent by March.

In the face of the outbreak, Foxconn did not “sit and wait”, but chose to actively help themselves. On February 5th Foxconn’s official WeChat Public announced that it would start a production line to produce masks, the first in the Group’s Longhua park, and a trial production on February 5th, which is expected to produce 100,000 masks a day.

It is expected that by the end of February, the entire workshop will produce up to 2 million per day, “not only will the Group’s staff to meet the needs of epidemic prevention, but will also actively support the export of external support as appropriate.”

“If workers can have masks, they can start more production lines. “Although the masks made by Foxconn are still in the certification process, a battle for self-help has begun.

Appleined in the Outbreak

Apple closes store

In response to CNBC’s questions, Apple CEO Tim Cook said the company was taking steps to address the new coronapneumonia outbreak, including talks with other parts makers to fill the shortage of parts caused by Chinese manufacturers’ delays in resuming work.

Apple’s expectations for the second quarter’s results are fairly broad. Apple expects second-quarter revenue of between $63 billion and $67 billion – far more than normal, as the uncertainty from the outbreak comes from.

Although suppliers have increased production as much as possible, the airPods wireless headset delivery date is still being delayed. Apple has added 45 million new AirPods to its airPods to deal with future production problems.

At least Ming-Chi Kuo, a well-known Apple analyst, said Apple had started making AirPods in Shenzhen. While production at Foxconn’s plants has not yet returned to normal levels, Apple has factories in Taiwan and India that are producing iPhones , albeit at a much lower rate.

And Soo is another major Apple foundry, and its factories are in a state of affairs. Supply chain sources said that the shanghai plant and The Usu has basically been full yin, with a 90% return rate, but by early March, the number of employees could be reduced to 60% of normal levels. The Kunshan plant had planned to begin assembling the iPhone SE 2 on February 10, but production of the iPhone SE 2 has been delayed because of a staff turnover rate of only about 40 to 60 per cent.

As the epidemic spread around the world, many manufacturers began to look for alternative sourcing channels. This can strain the supply of parts and further limit production. For example, other handset manufacturers may need to purchase modem chips and components similar to the iPhone, competing for support from parts manufacturers.

As of February 11, Apple’s offices in China were not working properly, and 42 stores were not open. Apple had planned to resume operations in China on February 10th, apparently delayed again.

Apples are ready for the rain

While Apple products are assembled and sold mainly in China, parts are purchased from all over the world. Only China’s parts suppliers are expected to be affected by the new coronary pneumonia outbreak, such as TSMC. Chinese parts suppliers are predicting a 5-10% decline in chip demand, a small decline that could easily be offset by non-Chinese manufacturers in Apple’s parts supply chain.

Since becoming Apple’s CEO, Cook has done a lot to strengthen apple’s supply chain to ensure redundancy and scalability. However, the complete industrial chain is China’s unique advantage, although some efforts have been made, Apple’s dependence on Chinese manufacturers is still increasing, but the range has narrowed.

The outbreak of new coronary pneumonia has helped Cook’s homework in advance. Second-quarter results will reveal how much the new coronapneumonia outbreak has affected Apple.

May be an opportunity for Apple

The spread of the epidemic in China is largely contained, but concerns about its spread in other parts of the world are growing. Organizers have announced they will not attend this year’s Mobile World Congress, following announcements by Amazon, Sony and Samsung that they will not attend.

Other smartphone makers, such as Huawei, want to launch the latest 5G handsets on the market as soon as possible, and their product release sprees will jump due to the outbreak, meaning they will lose their first-mover edge in the competition with the 5G version of the iPhone.

Android phones are usually ahead of the iPhone in terms of new features and technologies. The delay in the release of other 5G versions of Android phones means that the time gap between the 5G version of the iPhone and theirs will narrow further, which could be a windfall for Apple. Apple is widely expected to release the 5G version of the iPhone this fall.

Since February 10, plants in mainland China have been gradually re-opened, including Tesla’s Shanghai Super plant.