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Coronavirus disrupts Apple’s supply chains

Workers assemble electronic components at the Foxconn factory in Shenzhen, China.

Workers assemble electronic components at the Foxconn factory in Shenzhen, China. AFP via Getty Images

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The coronavirus continues its rapid spread in China, as the death toll topped 900 worldwide over the weekend. Both the Chinese government and big corporations there are trying to contain its spread by closing factories and ports, quarantining major population centers and keeping workers from returning to their jobs after the Lunar New Year.

All of this is disrupting supply chains for major consumer goods that are produced in China, like the smartphones that Apple sells in the U.S. and all over the world.

Most of Apple’s top-selling devices are made at contract manufacturer Foxconn’s huge factories in China. Exports come through the port of Wuhan — the epicenter of the epidemic. Foxconn said Sunday it could not make a decision to resume production “until further notice.”

Analysts have warned that Apple’s shipments from China could be down 5% to 10% this quarter. Equity analyst Angelo Zino at CFRA said Apple has tried to shift production to other Asian countries, like India and Vietnam, without much success.

“China just has a very well-established, sophisticated supply chain,” Zino said. “They’ve got the right people there, and a significant amount of demand coming out of China.”

Consumers in the U.S. appear to be paying close attention to the coronavirus. John Leer, an economist at Morning Consult, pointed to a recent survey.

“Thirty-nine percent of respondents said they are less likely to buy Chinese-made goods. It could just fuel the fire of anti-import sentiment,” he said.

Apple’s next new product out of China is expected to be a low-cost iPhone, aimed mostly at developing markets like India.

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