Apple flagged shortages of 6-8 million iPhones this holiday season, but UBS analysts have revealed the reality is far worse.
UBS analysts have slashed its forecast of total iPhone 14 production this year from 92 million units, to just 76 million. This is a drop of 16 million iPhones – and 20 per cent down from 2021’s iPhone 13 production.
UBS attribute this to the ongoing disruptions caused by the lockdowns in Foxconn’s Zhengzhou plant — the largest iPhone maker in the world — as well as weak demand for the entry level iPhone 14 models.
“It is important to monitor whether lengthening wait times for the iPhone 14 Pro/Pro Max affect demand,” UBS analysts, led by Grace Chen, wrote in a note.
“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 lockdown that impacted Zhengzhou has been lifted, however Foxconn is continuing its closed loop system to minimise positive exposure to Covid that could shut the factory again.
In addition, the Chinese government has suggested it will ease restricts as the country slowly reopens.
It might be a case of too little, too late, as Apple is reportedly making moves to shift a lot of its iPhone production out of China, and into India and Vietnam.
Long term, Apple plans to manufacture 40 to 45 per cent of its iPhones from India, according to Ming-chi Kuo, an analyst at TF International Securities.
Dan Panzica, a former Foxconn executive, now a supply chain advisor, told the Wall Street Journal that the sheer mass of China’s population means this is easier said than done.
“They’re not doing high-end phones in India and Vietnam,” said Panzica. “No other places can do them.”
In addition, India lacks the over-arching governmental control of China, meaning that regional governments “saddle the company with obligations before letting it build products there”, according to the WSJ.
“India is the Wild West in terms of consistent rules and getting stuff in and out,” Panzica said..
Perhaps with these plans in mind, Apple is being less bullish than UBS about its manufacturing prospects, having lowered its 2022 production target by just three million units, to 87 million phones, from 90 million.
“Apple is going to have to find multiple places to replace iPhone City,” said Panzica.
“They’re going to have to spread it around and make more villages instead of big cities.”