Shares of major Apple suppliers fall on report of production cut

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Investing.com– Shares of major Apple (NASDAQ:AAPL) suppliers logged steep declines this week after a report said that the iPhone maker had ordered fewer components from its suppliers for the first quarter, citing weak demand and supply chain disruptions.

Shares of Asian suppliers including Hon Hai Precision Industry (TW:2317) (Foxconn), Luxshare Precision Industry Co Ltd (SZ:002475), and Suzhou Dongshan Precision Manufacturing Co Ltd (SZ:002384) fell between 2% and 7% this week after Japanese publication Nikkei Asia reported that several suppliers of the technology giant flagged weaker orders for components of AirPods, the Apple Watch, and MacBooks.

Apart from weakening demand, the iPhone maker is also struggling with supply chain disruptions amid rising COVID-19 cases in China. Suppliers operating in the country have to now contend with looser controls on infections, as well as a surge in cases after the country relaxed several restrictions in December.

While the move is welcomed after nearly three years of strict anti-COVID lockdowns in China, it also heralds increased near-term disruptions for Chinese firms, as the country grapples with its worst outbreak yet.

COVID-linked disruptions also severely impacted production at Foxconn’s largest iPhone factory, in Zhengzhou. While the plant is now reportedly close to operating at full capacity, disruptions at the plant appear to have pushed Apple into further diversifying its supplier base.

The Financial Times reported that Apple plans to produce more premium iPhone models through Luxshare, pulling some production away from Foxconn. Luxshare’s stock price rallied over 3% from a two-month low on Thursday, following the news.

Foxconn shares on the other hand were languishing at their weakest level in 19 months.

Disruptions in China saw Foxconn attempt to move some of its production outside the country. The firm, which is Apple’s largest supplier, recently invested another $500 million in its Indian unit in a bid to expand its smartphone-making capacity in the South Asian country.