A factory shutdown for one of the biggest assemblers of iPhones in the world is poised to have significant knock-on effects for Apple.
With “supply chain issues” in the running for the most used phrase of 2022 already, companies across the globe are all just waiting for the next big issue to strike and send their delivery rates even lower.
And for Apple (NASDAQ: AAPL), that big issue has finally arrived.
iPhone production takes a hit
Strict COVID-19 regulations in China have forced iPhone assembler, Pegatron, to suspend production in the cities of Shanghai and Kunshan. The company is reportedly responsible for the assembly of 20% to 30% of all iPhones, so a shutdown is a serious blow to Apple’s supply chain.
This comes less than a month after another major assembler, Foxconn, also had to cease operations. One of its factories supposedly produces close to 50% of all iPhones sold so — despite the factory now returning to normal operation — this cessation will undoubtedly have knock-on effects.
iPhones are still the largest segment in Apple’s revenue-generating machine, with close to 60% of its profits coming from its flagship set of devices. Despite the June quarter typically being more muted for iPhone sales, investors may be worried considering the Cupertino-based company only just announced its newest iteration of the iPhone SE.
However, with a share of more than 23% in the global smartphone market last year, Apple investors needn’t be overly worried about revenue. With over a billion people using an iPhone, Apple has begun to significantly ramp up its sale of services. This offers the firm a much more cost-effective way to continue adding to its veritable treasure-trove of available cash.
All companies experience headwinds, and supply chain issues are an unfortunate part of life right now for many businesses. Few companies in the world have the resources available to navigate them quite the way Apple does, however, so perhaps don’t look to sell just yet.