Apple, one of the most valuable companies in the world, saw nearly $27 billion in value wiped out on Monday after reports that its Chinese manufacturers are resuming operations slower than expected.
One of the major companies affected by the delay is Foxconn. The Taiwanese firm is an integral part of Apple’s value chain and has most of its operations in China, while it’s also one of the largest contract manufacturing firms in the world. According to reports, Foxconn was forced to shut down its operations for weeks due to the escalating Coronavirus crisis in China.
Even though the company received authorization from Chinese authorities to reopen its factory in Zhengzhou, so far only 10% of employees have reported back to work. Media reports also note that Foxconn may have to wait a little longer to get the green light to open its Shenzhen plant which is crucial for its operations.
A Reuters report noted that employees were instructed to stay home earlier this week. An inspection of the Shenzhen facility is expected to take place later this week but in the meantime, it remains closed. The markets didn’t react well to the news. Apple’s stock fell 1.9 percent on Monday’s trading as investors grew weary of the crisis in China.
After all, the factories in Shenzhen and Zhengzhou are responsible for the production of the biggest share of Apple iPhones. There’s some worry that the current delays may affect production targets and Apple’s abilities to meet demand in the market. The effect this may have on company’s revenue could be huge.
Apple was expected to release its widely anticipated 5G devices in the fall. We are now seeing reports that the company may also opt to release a budget phone in March. The hope, for now, would be to get the two factories in China up and running as soon as possible.
However, it seems that some damage has already been done. As a matter of fact, reliable analysts reports note that no matter what happens, iPhone shipments are more likely to fall by at least 10% in the first quarter of the year.
There are also several analysts who feel that things may get worse. Chinese authorities have been working hard to contain the Coronavirus outbreak that has so far killed nearly 900 people in the country. It’s the worst outbreak to hit China in recent years.
Analysts believe that it could take two or three weeks optimistically to contain the crisis. However, it’s possible that the Shenzhen factory may still open before then depending on the safety assessment but we are still not sure.
Despite this, there is still hope that things may turn out positively for the American smartphone giant. Even if there’s a dip in iPhone shipments, many have argued that it may not have a long term effect on Apple stocks. But right now we just have to wait and see how everything goes in the coming weeks.
