How Much Of Apple's Revenue Is At Risk From China's Energy Crisis?

Apple, Inc. AAPL shares have lagged the market in the past three months as investors try to determine how large of an issue supply chain disruptions will be for the iPhone maker. An energy crisis in China could ultimately cause more damage to Apple’s business than the ongoing semiconductor shortage.

On Monday, Bank of America analyst Wamsi Mohan said China may be one of the biggest sources of risk for Apple in the near future.

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Apple’s China Exposure: Mohan estimates China accounts for more than half of Apple’s global manufacturing. Power rationing in China’s Suzhou, Kunshan, and Dongguan regions may continue to disrupt production through at least the first quarter of 2022, Mohan said.

There are at least 24 known iPhone production plants in the areas of China getting hit by the current power crisis. As many as nine of these locations exposed to halts or cuts produce connectors for Apple devices. These regions are also a large source of iPad production for Apple. The iPhone and iPad account for a combined 62% of Apple’s total revenue, Mohan said.

How To Play It: The power crisis in China was triggered by severe shortages in the coal market, rising raw materials prices and booming electricity demand. As a result, China has been implementing rolling blackouts and ordering certain factories to halt or cut production.

“This has potential to be an added production headwind apart from supply chain challenges, including semiconductor shortages,” Mohan said.

For now, Mohan remains cautious on Apple stock given all the near-term uncertainties.

Bank of America has a Neutral rating and $160 price target for Apple.

Benzinga’s Take: If Apple can’t rely on China to produce its devices, things could get ugly when the company reports its earnings numbers for the next couple of quarters. However, Apple has a long-term track record of consistent earnings and revenue growth, and it has one of the most robust balance sheets in the entire market.

Any short-term weakness in the stock from the supply chain disruptions could create an attractive entry point for long-term investors.