Ming-Chi Kuo: cornavirus could hurt Apple's 2021 production in China

Ming-Chi Kuo: Coronavirus could hurt Apple 2021 iPhone production


iPhone sales
The impact of coronavirus in China could hurt Apple in 2021.
Illustration: Cult of Mac

Analyst Ming-Chi Kuo warns that Apple could experience product shipment delays and other risks if the deadly coronavirus spreading in China is not significantly contained before March.

In a note to investors Wednesday obtained by Cult of Mac, the respected soothsayer also warned that the coronavirus has caused consumer confidence in a market Apple has been trying to grow, especially with smartphones.

The warning comes as Apple reportedly prepares to begin production on a new low-cost iPhone in China next month. Though most of its production facilities and suppliers are outside the virus epicenter around Wuhan, analysts fear the spread of the virus to other regions could force Apple’s facilities to shutdown under quarantine.

In addition to the budget-friendly iPhone, Kuo said Apple was on track to launch a new iPad Pro, MacBook Pro or Air, small wireless charging mat, a tracking tag and a high-end Bluetooth headphone.

Coronavirus and a ticking clock

Kuo spells out how travel restrictions now underway could create havoc on 2021 production schedules for iPhones, iPads and other products.

“We believe that Apple will make critical design decisions in [the first half of 2020] for new products in [the first half of 2021], including the product roadmap and critical specs,” Kuo wrote in his report. “However, it requires very close cooperation between Apple and suppliers to make sure that the new product design can meet Apple’s requirements for tests and mass production.

“If there are no significant improvements for the coronavirus epidemic in the foreseeable future and it affects Apple’s non-Chinese employee business trip plans to China, it would have an impact on Apple’s development schedules for the new product in [the first half of 2021].”

Kuo’s grim report comes the morning after Apple’s quarterly earnings call, where Apple CEO Tim Cook said the company is “monitoring” China’s containment efforts and is developing a “mitigation plan” to address possible production delays.

Apple said one Apple Store near Wuhan is closed, along with two supplier sites Cook said were “alternate sources.” Cook said Apple’s retail team has restricted hours at other stores and have adopted a daily deep-cleaning of the stores after hours to reduce the risk of the virus spreading.

Kuo said there was a decline in consumer confidence following the outbreak earlier this month, though he offered no data points on this.

Also impacting iPhone sales: the face masks people wear to protect themselves. Kuo said the masks “hurt user experience” because the mask keeps Face ID from working.

Kuo hopes the extension of the Chinese New Year and traffic restrictions around China will give health officials the space to slow the spread of the virus.