What Happens to Apple When China iPhone Sales Plunge?

By Douglas A. McIntyre Published Apr 13, 9:30AM EDT

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What Happens to Apple When China iPhone Sales Plunge? — © XIUYUAN YAO / iStock via Getty Images

Apple has two problems in China. The first is that the COVID-19 triggered a lockdown of the area in and around Shanghai, one of the world’s largest cities. That has and will curtail smartphone and computer demand. The other problem is that some of the same locked-down areas are home to factories that produce iPhone components.

Piper Sandler analyst Harsh Kumar says the Chinese lockdown will have little effect on Apple. He is wrong. iPhone assembly company Pegatron is shuttered. So are some plants of huge iPhone supplier Foxconn. Even an interruption of a few days can affect supply by hundreds of thousands of units. And the lockdown is not over. 9to5 Mac summarized the problem: “The latest COVID-19 lockdown measures in China have seen Apple production halted at three key Chinese suppliers. One of these in particular could significantly hit iPhone availability.” Its opinion is that the Pegatron problem is severe.

The lack of iPhone buyers across a part of China that has tens of millions of people is the most severe challenge to Apple. According to Counterpoint Research, Apple had 23% of the smartphone market in China in the final quarter of 2021.
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Compared to the balance of the stock market, particularly among tech companies, Apple’s shares continue to outperform. Year to date, they are off 5%. However, the Nasdaq is down by twice that much.
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The question about the value of Apple’s shares currently has little to do with things that are obvious. It has the most valuable brand in the world, and it has extraordinary consumer loyalty. It has remarkably inventive products, and it has the best closed system of hardware and software in the world. For now, those things are less important than Apple’s crippling problems in China.

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.