Apple iPhone Likely To Miss Consensus By 16M As China's Macros Weigh, Analysts Say

Anusuya Lahiri
·2 min read
3

  • UBS believes Apple Inc's (NASDAQ: AAPL) iPhone 14 generation may miss expectations by 16 million units this year, as China's Covid Zero policy takes a toll on its essential Zhengzhou plant and entry-level models face weak demand.

  • UBS analysts slashed their total iPhone 14 production forecast to 76 million from 92 million units for the second half of 2022, a 20% fall from 2021, Bloomberg reported.

  • They attributed the lower expectations to the manufacturing disruption faced by Foxconn, also known as Hon Hai Precision Industry Co Ltd (OTC: HNHPF), and softening demand for lower-end iPhone 14 models.

  • "The speed with which Apple and Hon Hai can resolve the challenges at Zhengzhou is key to 2022's fourth quarter and 2023's first quarter volume," the analysts wrote.

  • Foxconn's Zhengzhou campus closed-loop operation hampered efforts to compensate for lost assembly time.

  • The Foxconn facility at Zhengzhou produces most iPhone 14 Pro and Pro Max devices.

  • Turmoil at the Zhengzhou plant will likely lead to a production shortfall of 6 million iPhone Pro units.

  • Apple could also ask assemblers like Pegatron Corp (OTC: PGTRF) and Luxshare Precision Industry Co, which typically focus on lower-end iPhone models, to produce more premium models to meet holiday season demand, UBS said.

  • If such a shift happens, Foxconn's iPhone assembly share could fall from 70%-to-75% this year to 65%-to-70% in 2023, the analysts added.

  • Price Action: AAPL shares traded lower by 0.11% at $148.15 premarket on the last check Friday.

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Mar 2022

Barclays

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Equal-Weight

Feb 2022

Tigress Financial

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Strong Buy

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Credit Suisse

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Neutral

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