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The setbacks at Apple’s Chinese iPhone factory will certainly affect shipments, JP Morgan says, but the full impact won’t be known until the factory returns to normal.
Foxconn’s assembly plant in Zhengzhou, China, is dealing with the impact and strict government regulations surrounding a COVID outbreak. The impact on the output of the factory, Apple’s largest producer of iPhones, has led analysts to give their take on the situation.
On Monday, a note from JP Morgan to investors seen by AppleInsider admits it’s difficult to determine how much the plant has been affected “given limited public data points around current utilization.” However, the analysts believe that the sudden and rapid extension of delivery times for the iPhone 14 Pro and iPhone 14 Pro Max is “an indication of supply shortages” that are likely to continue through the end of 2022.
While the biggest impact on iPhone availability will be felt in the holiday quarter—the first quarter of Apple’s fiscal year 2023—”the full extent of the manufacturing headwinds will not be apparent until production can return to normal and the factory returns to full use.”
Apple’s rare press release about the affair, detailing delivery and confirming its reliance on the plant, tells JPM that headwinds to the quarter’s revenue and profit estimates “will likely be significant.”
In response, JPM is making its “first step in quantifying the potential impact, but still with an optimistic outlook around flexibility to manage production of other iPhone models.”
JPM’s shipping estimates for the iPhone 14 Pro and Pro Max are now down 5 million in the December quarter, while other iPhones are down 3 million in the same period. This equates to a total shipment forecast of 74 million for the period, down from 82 million.
At the same time, the iPhone volume forecast for the March quarter will grow from 56 million to 61 million, with some of the unmet demand from the December quarter expected to flow into the March quarter.
For the full year 2023, JPM now estimates total iPhone volumes to reach 237 million, up from 239 million earlier. This would equate to a 4% year-on-year decline.
In terms of revenue and earnings projections, JPM believes the December quarter will result in revenue of $121 billion and earnings per share of $1.91, down $128 billion and $2.14, respectively. This would be a 3% year-over-year decline in revenue and 9% in profit.
JPM maintains its one-year price target of $200, classifying Apple as “overweight.”