Apple sees worst coronavirus impact among tech firms
In just six weeks, Apple has fallen from fourth position to 14th place on the back of the impact of the coronavirus (COVID-19) pandemic, according to GlobalData’s consumer electronics thematic scorecard.
The latest edition of the data and analysis firm’s report, titled COVID-19 Impact on Consumer Electronics, ranks the top companies in the technology sector. It found Apple has experienced the worst coronavirus impact, tumbling 10 places from January to date.
Microsoft has also taken a hit, dropping from second to fifth over the same period, while Amazon moved one place higher from third place to second place, according to the report.
The COVID-19 virus, which originated in the central city of Wuhan in December, has gripped nations across the globe, claiming the lives of over 14 700, people with a current infection rate of over 342 000 and recoveries at over 99 000.
As many countries enter lockdown, 2020 will be a very bad year for IT services and consumer electronics, says GlobalData.
In January, several tech giants, including Amazon, Microsoft, Samsung, Google and Apple, temporarily closed offices, stores and factories in China, and restricted their employees from non-essential travel to the country.
The country is the world’s largest manufacturer of mobile phones and computers, exporting billions of dollars’ worth of goods every year, with Wuhan, known as Optics Valley, supplying a quarter of the world's optical fibre.
For Apple, the coronavirus has proven to be a far greater blow to its business compared to its rivals, due to the Cupertino tech giant being more sensitive to geopolitics, as a result of its significant reliance on China, both in terms of its supply chain and overall profit.
China is an important market for Apple – it is among the top five smartphone vendors in China and the only non-Chinese vendor, earning nearly 15% of its revenue from the country.
“Apple’s supply chain issues, and a predicted downturn in consumer electronics spending for the rest of 2020, contribute to its downgrade in our analysis,” says Cyrus Mewawalla, head of thematic research at GlobalData.
“It is easy to get distracted in this climate by COVID-19 because it is the over-arching issue facing CEOs today. For some, it is an existential issue.”
According to Apple’s latest earnings release, the Chinese marketplace accounts for 18% of Apple’s revenue, with more than 90% of Apple’s products assembled in China, notes Global Data.
The tech giant also sold fewer than 500 000 iPhones in China in February, a plunge of more than 60% compared to the same month last year.
In February, Apple became the first company to reveal the outbreak will result in it failing to meet its quarterly revenue target of $63 billion to $67 billion, due to “iPhone supply shortages” as a result of its Chinese factories being shut down in February.
In a letter sent to investors at the time, Apple said it is cutting its sales expectations for this quarter, which it had projected to be robust a few months earlier, citing two key reasons for the change in guidance: the worldwide iPhone supply being temporarily constrained, and secondly, the demand for its products within China being significantly affected.
While Apple has re-opened all 42 of its stores in China and some companies have resumed or partially resumed production in virus-hit Wuhan, previous halts have led to disruption in distribution channels, resulting in product shortages, companies missing sales targets andtriggering increased tech prices.
Analysts believe the second half of the year will be a key recovery period for the overall Chinese smartphone market and also for Apple, as the situation and consumer confidence improve.