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

Author: Anusuya Lahiri | December 02, 2022 08:30am

• 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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