On Apple’s analyst call for its Q1 financial results on Tuesday, CEO Tim Cook said that the company’s business is being impacted by China’s coronavirus and is making contingency plans in case the outbreak gets worse.
Apple relies heavily on Chinese factories for the production of most of its devices. The Nikkei’s Cheng Ting-Fang and Lauly Li quoted an unnamed Apple supply chain employee saying that the coronavirus has created “massive uncertainties and challenges” for the production of iPhones and AirPods.
Apple says it has several suppliers and some retail stores near the epicenter of the virus, which is located at the Chinese city of Wuhan.
Here’s Cook’s full statement from the earnings call:
We are working with our team in the effected areas and we have limited travel to business critical situations as of last week. The situation is emerging and we’re still gathering lots of data points and monitoring it very closely.
We have a wider than usual revenue range for the second quarter due to the greater uncertainty. With respect to the supply chain we do have some suppliers in the Wuhan area. For all of these suppliers there are alternate sources. We are obviously working on contingency plans to make up for any expected production loss.
With respect to the supply sources that are outside the Wuhan area, the impact is less clear at this time. The reopening of those factories after the Chinese New Year has been moved from the end of this month to February 10, depending upon the supplier location. And we’ve attempted to account for this delay in our larger range of outcomes . . .
With respect to customer demand and sales, we’ve already closed one of our stores, and a number of our channel partners have also closed their storefronts. Many of the stores that remain open also have reduced operating hours. We’re taking precautions and frequently deep-cleaning our stores as well as conducting temperature checks for employees.
While our sales within the Wuhan area are small, retail traffic has also been impacted outside of this area across the country in the last few days. Again, we have attempted to account for this in the expanded guidance range that we’ve provided you.
The coronavirus that originated in Wuhan has now killed 106 people and infected more than 4,500.
Cook said Apple is donating to relief organizations on the ground in China to help fight the spread of the virus.
The discussion of the outbreak was a sobering aside in a call that was otherwise full of upbeat news for Apple. The company reported record earnings for the 2019 holiday quarter, with significant increases in sales of iPhones, Apple Watches, and AirPods—including in China.