Daniel Ives: Lockdown over, Apple still faces heavy lifting

"This is some good news in what has been a horror show for Apple around iPhone production."

From a note to Wedbush clients that landed on my desktop Wednesday:

Last night China officially lifted the lockdown on Zhengzhou, also known commonly as iPhone city with Foxconn's main Apple production artery located in this key area. This is some good news in what has been a horror show for Apple around iPhone production, which has been operating at roughly 20%-30% of capacity over the past month in our opinion and is resulting in a massive unprecedented iPhone shortage globally heading into Christmas holidays for Cook & Co.

What started out a month ago as 3% iPhone 14 Pro shortages grew to 5% last week and now are roughly 10%+ of overall units with the potential to increase over the coming month depending on any production improvements from Foxconn.

We estimate demand vs. supply from consumers around iPhone 14 Pro are currently at a 3:1 ratio as many Apple stores, retailers, and online channels are looking empty handed for most iPhone 14 Pro models until at least early to mid January...

Now it's the painful waiting game to see what ramped production looks like over the next week for Apple to ease some iPhone shortages that are building globally. The Street will mostly look through this production disaster for Apple as a shift in iPhone timing and not penalize the stock to the full extent, however major strategic questions remain around the future of Apple's production in China.

Maintains Outperform rating and $200 price target.

My take: Ives is better at good news than bad.

4 Comments

  1. Robert Paul Leitao said:
    Last evening and again this morning I was on Apple’s site to see delivery dates for two different iPhone 14 Pro Max handsets. Last evening the delivery date for two iPhone 14 Pro Max handsets was Thursday, December 29th if ordered last evening. This morning the estimated delivery date was Friday, December 30th. Yes. We know there are production challenges. However, both of the estimated delivery dates are in the current fiscal quarter. As I mentioned last evening, we were a little late on our iPhone upgrades this year, ordering two iPhone 14 Pro Max handsets at the beginning of the month. The iPhones arrived last Saturday. While this is all anecdotal evidence, I don’t think the production delays are anywhere near what some sensationalized headlines suggest.

    7
    November 30, 2022
  2. Fred Stein said:
    Let’s take Daniel’s worst case 10%, which is really only a delay of a few weeks. No need for purple prose.

    Assume Pro models drive about 80% of all iPhones which are now about 41% of all Apple revenue. The math .1 * .8 * .41 or 3.3% revenue moved to next Q. The profit impact would be slightly higher. Maybe Apple had to help Foxconn with employee bonuses.

    2
    November 30, 2022

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