Apple has seen $165 billion in market value erased in less than a week as investors grow concerned about building iPhone shortages due to China Covid protests

Apple has seen $165 billion in market value erased in less than a week as investors grow concerned about building iPhone shortages due to China Covid protests
Xi Jinping and Tim CookAssociated Press
  • Apple is facing growing iPhone shortages due to protests in China over the government's zero-COVID lockdown policies.
  • The company has seen $165 billion in market value erased since last week on concerns of weak holiday sales.
  • Wedbush analyst Dan Ives estimated that Apple could see a 10% decline in iPhone unit sales this quarter.

Apple has seen its market value decline by $165 billion since last Wednesday as investors grow concerned about ongoing iPhone shortages and the impact on the company's typically strong holiday earnings results.

Apple has faced shortages of its iPhone 14 Pro models in recent weeks, but the lack of iPhone supply has grown even more pronounced amid protests in China against the government's zero-COVID lockdown policies.

China is still pursuing a zero-COVID policy, in which just a few reported infections could trigger a complete lockdown of an entire city. Meanwhile, the country has yet to roll out COVID-19 vaccines that are as effective as those from Pfizer and Moderna.

In October, a COVID outbreak at a Foxconn iPhone assembly plant in Zhengzhou led to many employees abandoning the "iPhone city" to avoid the stringent lockdown procedures. Last week, violent protests erupted at the Foxconn iPhone factory due to the stringent lockdown policies.

Now, civil unrest and protests against the COVID lockdown policies are spreading across the country, with a recent apartment fire that killed 10 people escalating public outcry against the government, as blame was pinned on the restrictive COVID policies.


The situation in China is bearish for Apple as it limits its ability to capitalize on what has historically been its strongest quarter of the year. Scheduled delivery times for all versions of its popular iPhone 14 Pro model are pushed out until after Christmas, on December 28, according to its website. Its less-expensive iPhone 14 models currently show immediate availability.

Apple is "extremely limited in their options," according to Wedbush analyst Dan Ives, as it relies heavily on China to manufacture a bulk of its devices. Ives estimated that the protests in China could reduce Apple's iPhone unit sales this quarter by as much as 10%. According to a Bloomberg report, it could lead to a shortfall of 6 million iPhone pro units.

"The zero China COVID policy has been an absolute gut punch to Apple's supply chain with the Foxconn protests in Zhengzhou a black eye for both Apple and Foxconn. The reality is Apple is... at the mercy of China's zero Covid policy which remains a very frustrating situation," Ives said. "Now is the painful waiting game to see what ramped production looks like over the next week for Apple to ease some iPhone shortages that are building globally."

But a ramp in iPhone production hinges on both a de-escalation in the protests in China, as well as a reduction in COVID-19 cases, and that seems increasingly difficult, according to Goldman Sachs.

"Local governments struggle to balance quickly bringing the spread of the virus under control and obeying the '20 measures' which mandate a more targeted approach. The central government may soon need to choose between more lockdowns and more Covid outbreaks," Goldman Sachs' Hui Shan wrote in a Sunday note.


And Apple may not be able to exit its tenuous relationship with China anytime soon, even when considering its recent moves to diversify manufacturing to other countries like Vietnam and India. In a note from earlier this month, Bank of America said it will take many years for Apple to diversify a significant amount of its manufacturing exposure away from China.

"We do not expect a rapid decoupling from China anytime soon. In our opinion, there has to be a significantly higher focus on System on Chip and more modular design/automated assembly, which we do not expect will happen quickly. The presence of a significant part of the supplier base in China also increases the complexity of shifting away from China," BofA said.

While Wedbush maintains its "Outperform" rating and $200 price target, Bank of America takes a more cautious approach with a "Neutral" rating and a $154 price target. Apple stock fell more than 2% to $140.66 on Tuesday.