How bad are the ‘iPhone city’ riots for Apple stock? Analysts see a ‘body blow’ to the world’s most valuable company

Hundreds of workers at the world’s largest iPhone factory in Zhengzhou, China protested against a strict zero-COVID policy, poor working conditionsand mismanaged contracts on Wednesday-and analysts warned that it could be a “body blow” for [hotlink]Apple[/hotlink].

Show videos posted on social media violent fights between authorities and employees of Foxconn, a contract assembler that makes iPhones. The protests are an escalation of tensions that reflect growing dissent against living conditions at factories across China during COVID.

From October.

Despite these efforts, which angered workers, Apple warned that production of the iPhone 14 Pro and other premium models will be lower than expected after significant production cuts at the Zhengzhou Foxconn plant – and it was that was before the latest protests.

It’s not the first time workers at an Apple supplier in China have turned to protests amid tough COVID-19 restrictions and poor working conditions this year. In May, hundreds of workers at Apple’s supplier asked [hotlink]Quanta computer[/hotlink] he clashed with guards and broke through isolation barriers after a two-month long COVID shutdown and wage disputes.

Wedbush technology analyst Dan Ives said the lockdowns and protests in China this year were a “major punch for Apple” which reduced the number of iPhone 14 units available for sale by 5%, leaving a “major shortage ” for the company. going into the holiday season.

And Ives fears the situation will get even worse after the latest protests.

“If Zhengzhou remains at lower capacity in the coming weeks and the unrest continues to see workers, this would lead to a major shortage of iPhone Pro in the critical Christmas time period, especially in the United States,” he wrote in research Wednesday. Note.

iPhone shortages are a big concern for Apple, considering that about 52% of the company’s fiscal 2022 revenue came from iPhone sales alone, according to SEC filings.

“This zero-Covid situation is a total body blow for Apple in its most important holiday quarter,” Ives wrote.

Despite the protests in China, Apple stock was flat on Wednesday. The big tech giant, which was the most profitable Fortune 500 firm in 2021, has been more resilient than most of its big tech peers this year, but its stock is still down about 17% year to date as fears of a recession mount.

Apple did not respond Fortunerequest for comments about protests or disruptions to iPhone production.

Mark Haefele, chief investment officer at UBS Global Wealth Management, also warned investors on Wednesday that the disruption to production due to recent protests and uncertainty about COVID policies “cause operational difficulties” for companies like Apple.

“Although relatively small in scale compared to the size of the workforce, the disruption comes at a time of peak demand in western markets, with Apple previously warning of lower shipments of premium handsets due to previous outages,” wrote Hafele in a research note on Wednesday.

And Deutsche Bank’s Jim Reid also warned on Wednesday that China’s zero-covid stance took a “fresh turn” this week, noting that restrictions in multiple provinces have “ratched up” as the number of situations consistently.

That means more locks could be on the way, which is bad news for Apple.

China reported its first COVID death in more than six months this week as daily cases continue to rise. More than 253,000 cases of COVID have been found across China in the past three weeks, government officials reported on Tuesday.

This story originally appeared on Fortune.com

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