SUMMARY
Coronavirus or Covid-19 has led to nearly 2,000 deaths in China alone
Apple says the demand in China for iPhones and Macs has declined
Tim Cook clarified that the decline in business is a temporary setback
With 72,436 confirmed cases and 1,966 deaths, the coronavirus (officially known as Covid-19) outbreak has disrupted nearly everything in China with the businesses also reeling from the impact to one of the world’s largest economies. Now, even as China is slowly trying to get back to work, does the impact on the business still remain? Answering that question, Apple CEO Tim Cook has written to its employees, highlighting that the company will not be able to meet the revenue guidance for March 2020.
“Work is starting to resume around the country, but we are experiencing a slower return to normal conditions than we had anticipated. As a result, we do not expect to meet the revenue guidance we provided for the March quarter due to two main factors,” Cook said in a blog post addressed to Apple employees.
Cook elaborated that the worldwide iPhone supply will be temporarily constrained. Even though the iPhone manufacturing partner sites are located outside Hubei province in China and have been reopened, but “they are ramping up more slowly than we had anticipated,” cook added.
Moreover, the demand for Apple products has also been affected in China as the stores remain shut. Cook noted that the stores that are open have been operating at reduced hours and with slow customer traffic.
“We are gradually reopening our retail stores [in China] and will continue to do so as steadily and safely as we can. Our corporate offices and contact centers in China are open, and our online stores have remained open throughout,” Cook added.
Cook clarified that the demand for Apple products and services outside China has been “strong” and in line with the company’s expectations. The Apple CEO added that the “situation is evolving” and the company will provide more information regarding the same in earnings call in April.
Cook emphasised that Apple is “fundamentally strong” and the disruption to the business and revenue is temporary. For now, the company has decided to focus on the health and safety of its employees, supply chain partners, customers and the communities the company operates in. Apple has also doubled the previously announced donation.
Apple Products In India
In the fourth quarter of the fiscal year 2019, Apple India recorded an all-time revenue hike for the sales of its laptops Mac in the country. At the sales call, the company stated that Apple’s growth trajectory witnessed a growth after some dull quarters.
Apple noted that even its iPhone 11 series witnessed a good response from the Indian buyers. The company was hoping to continue the same trajectory in the future as well. The company also started the production of iPhone XR at its manufacturing partner Foxconn’s facility in Chennai.
However, the slowdown of the iPhones supply will likely affect its growth in India at least in the premium segment, where most iPhones are made in China. In 2019, there was a slow down in the iPhone sales in India, which led to an increase in the price of the product and higher import duties. This cost Apple quite a fortune.
As per the regulatory filings, Apple’s operations revenue fell 19% from INR 13,049 Cr in FY18 to 10,538 Cr in FY19. The total income had also dropped by 18.5%, from INR 13,098 Cr to INR 10,674 Cr. Apple’s net profit fell by 70% to INR 262 Cr compared to INR 896 Cr in FY18.
