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Morgan Stanley analysts said in a note Monday that following reports Apple’s (NASDAQ:AAPL) full iPhone production at Hon Hai’s Zhengzhou Park is unlikely to resume until the end of December or early January, the firm’s Greater China Tech HW team believes the incremental iPhone production shortfall from the news could amount to just 1-2M units in the Dec quarter.
That is potentially far better than some analysts feared.
“Reports this morning indicate a 3-4 week delay to reaching full iPhone production at Hon Hai’s Zhengzhou facility. Alongside reporting November revenue this morning, Hon Hai (covered by Sharon Shih), disclosed that iPhone production at Zhengzhou Park won’t reach full utilization until the end of December or early January 2023 vs. prior expectations for full production starting in late November to early December, due to COVID controls,” wrote the analysts.
“While capacity is gradually resuming, and there is new staff hiring underway, reports this morning indicate it could take 3-4 weeks before production at the largest iPhone production facility in the world ramps to 100% utilization.”
The analysts added that on the positive side, Hon Hai maintained their December quarter revenue guidance, and Morgan Stanley’s Greater China Hardware team, which is led by analyst Sharon Shih, believes this implies that the incremental impact to December quarter iPhone production “could amount to only 1-2M units more than the original 6-7M unit impact we’ve already included in our December quarter forecasts.”
“That suggests the total iPhone production shortfall for the December quarter would now amount to 7-9M units vs. bear-case concerns of closer to a 15M+ unit shortfall. For reference, Sharon currently forecasts 79M iPhone builds in the December quarter (implying 81.4M iPhone shipments), while we forecast a more conservative 78.5M iPhone shipments in the December quarter,” the analysts concluded.
Apple shares are down 0.5% at the time of writing.
