Apple is bracing itself against a growing coronavirus outbreak, restricting business travel to China and closing one Apple Store as health officials try to contain the deadly virus.
Apple is also trying to gauge the potential disruption to production. Most of the world’s iPhones, as well as other devices, are assembled in China with components coming from a network of nearly 400 suppliers.
The virus is spreading as Apple is reportedly a couple of weeks away from reportedly beginning production on a new, budget-friendly iPhone.
Apple’s plan for a crisis
“The situation is emerging, we’re still gathering a lot of data points and monitoring it very closely,” CEO Tim Cook said during a quarterly earnings call with investors today.
Most manufacturing is outside of the virus’s epicenter of Wuhan, where government-ordered quarantines have shut down businesses, including an Apple Store and two Apple suppliers Cook described as “alternate sources.”
Following the 2011 tsunami in Japan, Apple dual-sourced components from vendors separated by geography in the event of a major crisis. The tsunami’s aftermath delayed iPad 2 production.
Even with contingencies, investment analysts are wringing their hands over the virus potentially halting production.
On Monday, the Dow Jones on Monday dropped nearly 400 points due to predictions of a worsening outbreak.
“Supply chain disruption is a worry if employees across Foxconn and other component manufacturing hubs in China are restricted,” analyst Dan Ives, of Wedbush Securities, told Bloomberg. “If the China outbreak becomes more spread it could negatively impact the supply chain which would be a major investor worry.”
Chinese officials have confirmed 2,714 cases in and around Wuhan. There are less than 300 confirmed cases in the two provinces that are home to many of Apple’s factories and suppliers. The death toll now stands at 106.
Cook said Apple is “deep-cleaning” its stores after hours to ward off the virus but provided no further details.
Apple has some 10,000 direct employees in China between corporate and retail sites and routinely flies US staff there for assignments.
“We are working very closely with our team and our partners in the affected areas, and we have limited travel to business-critical situations as of last week,” Cook said. “We’re obviously working on mitigation plans to make up for any expected production losses.”
Cook said Apple is donating to organizations working to contain the virus.