Advertisement

Apple’s coronavirus warning rattles markets

Apple has warned that disruption in China caused by the coronavirus will hit first-quarter revenues.

In a move that “will send waves across Wall Street”, tech giant Apple has warned that first-quarter revenues will miss already-reduced forecasts, due to disruption in China caused by the coronavirus, reports the Financial Times. Store closures have hit sales, while smartphone production has fallen as the virus has “made it hard for workers at all levels to get back to work”. 

Advertisement - Article continues below

The “double whammy” of supply problems and reduced sales may hit Apple harder than most; Chinese customers account “for nearly a fifth of revenue” and “essentially all” iPhones are assembled there by partner Foxconn, note Pete Sweeney and Robert Cyran on Breakingviews.

However, Apple is by no means the only company affected: “everything from vitamins” to cars depends on materials from China, which remains a “dominant” producer of intermediate components. Indeed, even though gaming giant Nintendo has already moved some production to Vietnam, it still anticipates shortages of its latest Switch games console.

Moving out of China entirely would be “practically impossible” for Apple in the short term, given the scale of its existing network and China’s “incomparable ability” to mobilise a workforce of millions, says Bloomberg. However, in the medium term Apple hopes to reduce its dependence on China by being “less reliant” on pure hardware sales for the bulk of its revenue, which is why it is currently pouring “billions of dollars” into creating its own streaming content for Apple TV+ and building subscription services such as Apple Music and Apple Arcade.

Advertisement
Advertisement

Recommended

The coronavirus is scary – but it's irrelevant to your investments
Investment strategy

The coronavirus is scary – but it's irrelevant to your investments

The spread of the coronavirus is causing alarm around the world. And, while it could be a serious short-term threat to human health, it’s not somethin…
24 Jan 2020
Uber gobbles up US food-delivery platform Postmates
US stockmarkets

Uber gobbles up US food-delivery platform Postmates

Shares in minicab firm Uber jumped by 4% after it acquired food-delivery platform Postmates for $2.65bn.
9 Jul 2020
Has the stockmarket bounce stalled?
Stockmarkets

Has the stockmarket bounce stalled?

US stocks have come under renewed pressure as America suffers a second wave of Covid infections.
2 Jul 2020
The US stockmarket is a bubble. So is it time to sell?
US stockmarkets

The US stockmarket is a bubble. So is it time to sell?

The US stockmarket is overvalued and there are many better opportunities elsewhere. So should you dump your US stocks and go after them? John Stepek e…
19 Jun 2020

Most Popular

An economics lesson from my barber
Inflation

An economics lesson from my barber

On reopening his shop after lockdown, Dominic Frisby’s barber doubled his prices. It’s all part of the post-Covid inflation process – and we’re going …
8 Jul 2020
Three ideas for Lloyds Bank's new boss
UK stockmarkets

Three ideas for Lloyds Bank's new boss

The Black Horse needs whipping into shape. A change at the top provides a great opportunity, says Matthew Lynn.
12 Jul 2020
Why the moving average is my favourite charting tool
Sponsored

Why the moving average is my favourite charting tool

Traders and technical analysts use "moving averages" to iron out daily fluctuations and give a much clearer picture of a market's direction. Dominic …
13 Jul 2020