- UBS believes Apple Inc's AAPL iPhone 14 generation may miss expectations by 16 million units this year, as China's Covid Zero policy takes a toll on its essential Zhengzhou plant and entry-level models face weak demand.
- UBS analysts slashed their total iPhone 14 production forecast to 76 million from 92 million units for the second half of 2022, a 20% fall from 2021, Bloomberg reported.
- They attributed the lower expectations to the manufacturing disruption faced by Foxconn, also known as Hon Hai Precision Industry Co Ltd HNHPF, and softening demand for lower-end iPhone 14 models.
- "The speed with which Apple and Hon Hai can resolve the challenges at Zhengzhou is key to 2022's fourth quarter and 2023's first quarter volume," the analysts wrote.
- Foxconn's Zhengzhou campus closed-loop operation hampered efforts to compensate for lost assembly time.
- The Foxconn facility at Zhengzhou produces most iPhone 14 Pro and Pro Max devices.
- Turmoil at the Zhengzhou plant will likely lead to a production shortfall of 6 million iPhone Pro units.
- Apple could also ask assemblers like Pegatron Corp PGTRF and Luxshare Precision Industry Co, which typically focus on lower-end iPhone models, to produce more premium models to meet holiday season demand, UBS said.
- If such a shift happens, Foxconn's iPhone assembly share could fall from 70%-to-75% this year to 65%-to-70% in 2023, the analysts added.
- Price Action: AAPL shares traded lower by 0.11% at $148.15 premarket on the last check Friday.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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