Apple Will Not Suffer Shortage but Demand is Unclear

Would you buy an iPhone now? That is a question Apple’s suppliers are trying to answer as China reopens its economy after months of lockdown and the US company factories resume operations. While China may be slowly going back to normal, much of Europe and the US are still on lockdown and unemployment is soaring globally.

“No one is talking about manpower or material shortage (in China) anymore. Now everyone is looking at whether demand from the US and Europe can keep up,” said to Reuters a senior official at one of Apple’s major contract assemblers, who has direct knowledge of the matter. “The focus now is the demand from consumers in the US and Europe.”

According to the official, Apple’s orders for 1Q20 are likely to drop 18 percent compared to the previous year. The production ramp-up for new phones that work with next-generation 5G networks has been postponed, this person said, though it is still possible the 5G phones could be launched as scheduled in the fall.

One of Apple’s key display suppliers is preparing for a similar level of contraction. The company had anticipated shipping 70 million iPhone displays this year but is now considering lowering that target by more than 17 percent to 58 million units. The company is also planning to reduce the workforce at its Apple-designated production lines at its Vietnam factory.

Daunting Prospect

With the COVID-19 pandemic spreading across the world, the urgent question for Apple is how many buyers there will be both for current models and the new slate of phones expected in the fall. In February, the company reduced its sales forecast for 1Q20. 

In the US, consumers seem uncertain whether they will resume spending. In a survey of more than 2,600 US adults by Civis Analytics conducted in mid-March, more than half of respondents said they planned to spend about the same on consumer electronics as before the virus outbreak if the situation is contained in the coming weeks. But if the situation worsens, one-third each said they would spend less, the same or more on consumer electronics when conditions returned to normal.