China's Coronavirus will impact Apple's business - but how much is unknown

Posted:
in General Discussion edited January 2020
As the 2019 Novel Coronavirus continues to spread across China, Apple will see some impact from the outbreak -- but to what extent various aspects of its business will be impacted remains to be seen.

A coronavirus, recognizable by its crown-like halo
A coronavirus, which can be identified by its crown-like halo


The city of Wuhan, China has begun enforcing strict rules aimed at minimizing the spread of the new disease, which has claimed 80 lives before January 27 according to the Chinese government. Public transit has shut down, businesses and schools are closed, holiday celebrations have been cancelled, and any travel in or out of the city has been expressly forbidden.

Apple supplier Foxconn has ordered employees who were visiting Taiwan for the Chinese New Year to extend their stay and not return to their Wuhan plant in China, according to Straitstimes. A factory, such as the ones Foxconn operates, could quickly become overrun with an outbreak, potentially putting workers at unnecessary risk and effectively shutting down production.

Foxconn locations in China overlaid on Corona virus infections
Foxconn locations overlaid on Coronavirus infections, the deeper red, the more infections - infection data provided by Wikipedia


In addition to asking many employees to stay at home, Foxconn has ramped up employee health monitoring in their Wuhan factory. Foxconn has provided employees with face masks to prevent the spread of the virus. Employees must also have their temperature checked daily, as one of the first symptoms of the illness is a fever.

But, monitoring for fever may not be enough. Present information about the virus suggests that contagion can be spread for days before a fever develops.

Understanding 2019-nCoV

The 2019 Novel Coronavirus, termed "2019-nCoV" for short, is a type of coronavirus responsible for causing respiratory distress in the infected. Symptoms are typically flu-like, with a fever, cough, and shortness of breath. Those infected usually go on to develop pneumonia.

Other diseases caused by coronaviruses include severe acute respiratory syndrome (SARS) and Middle East respiratory syndrome coronavirus (MERS). SARS, MERS, and now 2019-nCoV are global outbreaks.

Like most coronaviruses, it's thought that the virus mutated from a strain that only infected animals, to one capable of infecting humans.

According to the CDC, 2019-nCoV was first detected on December 8, 2019, in Wuhan City, Hubei Province in China, and has been expanding into other areas. In China, there have been nearly 2,800 confirmed cases of the 2019-nCoV and 80 fatalities.

At present, 2019-nCoV is thought to have a mortality rate of around four percent in total, significantly less than SARS, which was 10 percent, and MERS with mortality rates as high a 35 percent. For context, the 2018-2019 outbreak of flu had a mortality rate of just under seven percent for those hospitalized, according to the CDC.

As with most respiratory illnesses, those at greatest risk are children under three and adults over 65. Many of the deaths in the 2019-nCoV outbreak have been those who already had pre-existing conditions that would have made fighting the virus much more difficult, including diabetes, high blood pressure, and heart disease.

2019-nCoV seemingly spreads very quickly. Between January 25 and January 26, over 400 new cases were confirmed. Since its discovery on December 8, 2019, there have been nearly 2,800 confirmed cases. Experts are not sure how the virus spreads from person to person, 2019-nCoV is thought to spread like most other respiratory illnesses -- from contact with saliva and mucus.

Those who have the disease are contagious for a few days before they show symptoms, and those who become infected may not show symptoms until 14 days after exposure. Complicating this, is the China government's historical under-reporting of cases -- so in this early stage, many data points are not yet clear.

Foxconn factory workers often work in very close contact with each other
Foxconn factory workers often work in very close contact with each other


Incredibly dense population centers, such as Wuhan, are the ideal location for outbreaks to start. Wuhan has 11 million people in the city proper, with a metropolis region of over 19 million people. Especially densely populated areas, such as factories, schools, and tourism hot-spots are at greatest risk for spreading the disease between people.

2019 n-COV Management

At the time of reporting, there's no vaccine for 2019-nCoV, though researchers are attempting to develop one. Those who become infected are placed in quarantine and provided with medical care to help manage their symptoms.

Those who aren't infected are encouraged to avoid contact with anyone who is symptomatic. Health organizations, such as the CDC and WHO, have recommended that everyone brush up on handwashing practices.

Q: What can I do to protect myself from #coronavirus?

A: https://t.co/PKzKaO2yfK pic.twitter.com/eNhlhR0PEq

-- World Health Organization (WHO) (@WHO)


Tim Cook has announced that Apple will donate money to groups on the ground helping to support those affected by the 2019-nCoV.

What an outbreak means for Apple

Apple has three main businesses and concerns in China. There are iCloud data centers, a large Apple retail presence, and a larger manufacturing base mostly driven by Foxconn.

Map base provided by Wikipedia user
Apple locations overlaid on Coronavirus infections, the deeper the red, the more infections - infection data provided by Wikipedia

Apple's iCloud

Apple Cloud centers are not expected to be heavily impacted by 2019-nCoV. Data centers, while large, are often not staffed with many people and the people there are mostly used in a crisis, as opposed to steady-state operation.

Additionally, data centers require less maintenance than something like a store, and could operate with fewer employees if needed, potentially for long periods of time.

Apple retail

Beyond staffing concerns, Apple Stores will likely see decreased customers during the height of the outbreak. As a result, this means lower sales in the region as the disease spreads.

Apple has no stores in Wuhan. And, effective on January 27, it has cut the operating hours for stores across mainland China.

Apple has pre-existing concerns maintaining strong sales -- especially in mainland China. The 2019-nCoV outbreak could slow down any potential growth in the Chinese market. It's also probable that other smartphone suppliers -- and the economy at large -- will see a measurable decrease in revenue.

Foxconn factories and Apple Mac, iPad, and iPhone production

At this time, in late January 2020, it is impossible to know how long the outbreak of the 2019 Novel Coronavirus will last. The 2002 SARS outbreak lasted roughly six months -- and Apple was much smaller then. If the 2019 Novel Coronavirus were to last as long, it would have a measurable impact on modern Apple device production.

As a general rule, Apple starts device production about 60 days before a Mac or iPad event, and three to four months before the September iPhone release event. With most of its major factories located in mainland China, an outbreak is potentially a threat to nearly every upcoming product release in 2020.

If Apple is planning on a March event, the production of new devices expected at that event would need to begin immediately after the Chinese New Year. Depending on the severity of the outbreak, the fall announcement could be threatened as production for the iPhone 12 would need to be in full swing by July.

Moving forward

The SARS Apple was a fraction of the size of current Apple. Production was more easily moved, and the impact to the company was negligible. This is a slightly different matter, with the company producing more than a factor of 50 times more devices annually now than it was then.

The 2019 Novel Coronavirus, while serious, is not the end of the world. While late to fully report the data about the Corona virus outbreak, China and the rest of the world now have capable people working on caring for those affected by the outbreak. They will work to minimize damages and loss of life.

While this does present a problem for Apple in the coming months, it is not going to sink the company. And, any impact will be felt industry wide. It is still wise to keep an eye out for announcements of delayed or altered events in the next coming months as the situation continues to evolve.
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Comments

  • Reply 1 of 27
    lkrupplkrupp Posts: 9,010member
    Current panic in the stock market just reinforces the FACT that it runs on fear and greed. Along with the survivalists who are heading for their bunkers as we speak, investors are scrambling to unload their securities and bury their gold in the back yard. Amazing times we live in with all these apocalypses at our front door. Time for a Guinness, a lawn chair and an umbrella to watch the show as social media dooms us to oblivion.
    cornchiptmaygutengelGG1flyingdpCarnage
  • Reply 2 of 27
    MacProMacPro Posts: 19,253member
    lkrupp said:
    Current panic in the stock market just reinforces the FACT that it runs on fear and greed. Along with the survivalists who are heading for their bunkers as we speak, investors are scrambling to unload their securities and bury their gold in the back yard. Amazing times we live in with all these apocalypses at our front door. Time for a Guinness, a lawn chair and an umbrella to watch the show as social media dooms us to oblivion.
    Plus, if AAPL drops a long way due to this it would be an excellent time to buy more. 
    lkruppyojimbo007cornchipmacseekerflyingdpArszy
  • Reply 3 of 27
    M68000M68000 Posts: 329member
    Yes, this will affect others besides Apple.   If anybody has been thinking about getting a new iPhone 11, you may want to get one now while you can.  As for the iPhone 12, who knows, but if things don't improve dramatically with the crisis in China, is it too far of a stretch to say there may be no iPhone 12 this year?  This could even postpone the Olympics in Japan?   Who would want to travel there until there is a vaccine?  I feel bad for the Chinese and everybody affected by this.   Hope there is better news soon
  • Reply 4 of 27
    Off-topic: I was just in Queenstown, NZ for a vacation (lovely spot!), and struck up a conversation with a young Korean couple seated next to us in a restaurant. I commented on the fact they were each holding new iPhone 11s rather than Samsung - they replied that everyone they knew preferred iPhones. Admittedly an anecdotal data point, but still...
    tmayjcs2305GG1Arszybadmonk
  • Reply 5 of 27
    FatmanFatman Posts: 513member
    The US needs to get manufacturing the hell out of that whole region  - Chinese tariffs, communist government, pollution, horrendous labor practices now diseases, Even other Asian countries like Japan have government issues, tsunami/earthquakes - bring it back home Apple!
  • Reply 6 of 27
    MacPro said:
    lkrupp said:
    Current panic in the stock market just reinforces the FACT that it runs on fear and greed. Along with the survivalists who are heading for their bunkers as we speak, investors are scrambling to unload their securities and bury their gold in the back yard. Amazing times we live in with all these apocalypses at our front door. Time for a Guinness, a lawn chair and an umbrella to watch the show as social media dooms us to oblivion.
    Plus, if AAPL drops a long way due to this it would be an excellent time to buy more. 
    Hoping for the best, but if the mortality rates (2.99%) on this one prove consistent from country to country, a lot of people may die before an effective treatment is found. 
  • Reply 7 of 27
    jcs2305jcs2305 Posts: 1,172member
    Fatman said:
    The US needs to get manufacturing the hell out of that whole region  - Chinese tariffs, communist government, pollution, horrendous labor practices now diseases, Even other Asian countries like Japan have government issues, tsunami/earthquakes - bring it back home Apple!

    Do you think it's just that easy?  What you are saying sounds good, but it is a massive undertaking. It's not like all iPhone parts are made here and we just airdrop them in China and they are suddenly assembled. Haha  This is the same thing I think about when the POTUS slaps tariffs on products and he demands companies make products here. We don't have the supply chain or infrastructure currently to support this. Most factories are gone or empty shells here anymore.. we haven't actually made many things here in a considerable amount of time.

    Do I want the products made here.. hell yes.. Do I want the jobs here to help the people and economy..again..hell yes I do. I just don't think folks are realizing what it would take to " Bring it back home" as you put it. I didn't even mention the price increases we as consumers would see if things came back here.
    edited January 2020 StrangeDaysGeorgeBMacspice-boy
  • Reply 8 of 27
    lkrupplkrupp Posts: 9,010member
    Fatman said:
    The US needs to get manufacturing the hell out of that whole region  - Chinese tariffs, communist government, pollution, horrendous labor practices now diseases, Even other Asian countries like Japan have government issues, tsunami/earthquakes - bring it back home Apple!
    Are you willing to pay double for your tech and clothing?
    GeorgeBMac
  • Reply 9 of 27
    65026502 Posts: 365member
    lkrupp said:
    Fatman said:
    The US needs to get manufacturing the hell out of that whole region  - Chinese tariffs, communist government, pollution, horrendous labor practices now diseases, Even other Asian countries like Japan have government issues, tsunami/earthquakes - bring it back home Apple!
    Are you willing to pay double for your tech and clothing?
    We all know it won't be double (even Apple has admitted this), but yes I am. If my $4 T-shirt costs $8, so be it.
    StrangeDays
  • Reply 10 of 27
    sflocalsflocal Posts: 5,524member
    lkrupp said:
    Current panic in the stock market just reinforces the FACT that it runs on fear and greed. Along with the survivalists who are heading for their bunkers as we speak, investors are scrambling to unload their securities and bury their gold in the back yard. Amazing times we live in with all these apocalypses at our front door. Time for a Guinness, a lawn chair and an umbrella to watch the show as social media dooms us to oblivion.
    And knowing this, I have profited greatly by it.  I always load up on AAPL during those times and plan on doing it again.

    I also bought PG&E stock a couple months back with it tanked due to the fires.  Needless to say, I laughed to the bank. :)

    While it's sad that stock valuation has little to do with the performance of the company, it also makes it easy for those with teeth to be in the game knowing how emotion, panic, and flat-out greed now runs the market.
    Carnage
  • Reply 11 of 27
    sirlance99sirlance99 Posts: 1,262member
    lkrupp said:
    Current panic in the stock market just reinforces the FACT that it runs on fear and greed. Along with the survivalists who are heading for their bunkers as we speak, investors are scrambling to unload their securities and bury their gold in the back yard. Amazing times we live in with all these apocalypses at our front door. Time for a Guinness, a lawn chair and an umbrella to watch the show as social media dooms us to oblivion.
    If things can’t be made and shipped from China, things will not be so good. So it’s not panic. It’s reality. 
  • Reply 12 of 27
    sirozhasirozha Posts: 801member
    3% of the Chinese population is about 40 million people. If this virus is as deadly and fast spreading as suspected, China is up for a rough ride, and so is the rest of the world, since we won’t be able to stop the virus from spreading. 

    Just in 24 hours, the number of dead from
    the Coronavirus has increased by 25% and the number of infected has increased by 45%. The number of infected now stands at over 4,000 with the number of dead at 106. 

    If the infections and deaths continue to increase exponentially like they have been, Apple will see a dramatic decrease in manufacturing capabilities. The low  stock of iPhones in the supply chain means that the supply will dry out within a couple weeks. 
    edited January 2020
  • Reply 13 of 27
    I hope Apple ramps up production in places like Viet Nam and India. 
  • Reply 14 of 27
    Does anyone know if not only iPhones but also any product manufactured where infected people could be contaminating their hands then handling product or breathing on product can be leaving coronavirus or others on the products which then touch ears and mouths? Couldn’t or shouldn’t they be irradiated to kill virus and bacteria transferred to them without damaging the electronics? Maybe not this one, but eventually. Perhaps some companies can start looking ahead and planning for customer reassurance when the big one finally hits. 
  • Reply 15 of 27
    tmaytmay Posts: 5,082member
    microbe said:
    Does anyone know if not only iPhones but also any product manufactured where infected people could be contaminating their hands then handling product or breathing on product can be leaving coronavirus or others on the products which then touch ears and mouths? Couldn’t or shouldn’t they be irradiated to kill virus and bacteria transferred to them without damaging the electronics? Maybe not this one, but eventually. Perhaps some companies can start looking ahead and planning for customer reassurance when the big one finally hits. 
    It isn't an issue for viruses. Most will lose all viability within less than 24 hours on a hard dry surface, which is what comprises most of the iPhone. Most health risk from viruses comes from air borne droplets from a cough or a sneeze being inhaled, or from direct contact from hand to hand contact with an infected person, which is inadvertently transferred to the face or mouth.
    StrangeDaysGeorgeBMac
  • Reply 16 of 27
    If there’s even a glimmer of “positive” news so far, it is that the mortality rate is flattening down to 2.5% now (versus 2.9% mortality rate based on the early reporting). Obviously this is still horrible, but it is reducing as exposure expands.

    Could theoretically result in 156 million people dead worldwide if the entire population was eventually exposed.
    edited January 2020
  • Reply 17 of 27
    jcs2305 said:
    Fatman said:
    The US needs to get manufacturing the hell out of that whole region  - Chinese tariffs, communist government, pollution, horrendous labor practices now diseases, Even other Asian countries like Japan have government issues, tsunami/earthquakes - bring it back home Apple!

    Do you think it's just that easy?  What you are saying sounds good, but it is a massive undertaking. It's not like all iPhone parts are made here and we just airdrop them in China and they are suddenly assembled. Haha  This is the same thing I think about when the POTUS slaps tariffs on products and he demands companies make products here. We don't have the supply chain or infrastructure currently to support this. Most factories are gone or empty shells here anymore.. we haven't actually made many things here in a considerable amount of time.

    Do I want the products made here.. hell yes.. Do I want the jobs here to help the people and economy..again..hell yes I do. I just don't think folks are realizing what it would take to " Bring it back home" as you put it. I didn't even mention the price increases we as consumers would see if things came back here.
    If the supply chain was rebuilt over time (and there’s no real reason this couldn’t happen, it’s just a matter of incentives) and most of the manual labor was instead automated... it’s possible.
  • Reply 18 of 27
    jcs2305 said:
    Fatman said:
    The US needs to get manufacturing the hell out of that whole region  - Chinese tariffs, communist government, pollution, horrendous labor practices now diseases, Even other Asian countries like Japan have government issues, tsunami/earthquakes - bring it back home Apple!

    Do you think it's just that easy?  What you are saying sounds good, but it is a massive undertaking. It's not like all iPhone parts are made here and we just airdrop them in China and they are suddenly assembled. Haha  This is the same thing I think about when the POTUS slaps tariffs on products and he demands companies make products here. We don't have the supply chain or infrastructure currently to support this. Most factories are gone or empty shells here anymore.. we haven't actually made many things here in a considerable amount of time.

    Do I want the products made here.. hell yes.. Do I want the jobs here to help the people and economy..again..hell yes I do. I just don't think folks are realizing what it would take to " Bring it back home" as you put it. I didn't even mention the price increases we as consumers would see if things came back here.
    If the supply chain was rebuilt over time (and there’s no real reason this couldn’t happen, it’s just a matter of incentives) and most of the manual labor was instead automated... it’s possible.

    The supply chain was already rebuilt -- in the place that does it faster, better and cheaper:   China. 
    Nothing has changed since then except the start of a politically motivated propaganda war.
  • Reply 19 of 27
    lkrupp said:
    Current panic in the stock market just reinforces the FACT that it runs on fear and greed. Along with the survivalists who are heading for their bunkers as we speak, investors are scrambling to unload their securities and bury their gold in the back yard. Amazing times we live in with all these apocalypses at our front door. Time for a Guinness, a lawn chair and an umbrella to watch the show as social media dooms us to oblivion.

    The U.S. markets are not only reaching the "irrational exuberence" stage but are no longer based on fundamentals but on artificial fiscal and monetary stimuli.  The latest surge was based on the thinking that the final risk factors had faded away and there was no longer anything holding it back.   So, naturally, investors will be highly sensitive when they see a risk factor pop up and will tend to over respond.

    Right now the PE ratio of the S&P500 is over 24 when its median is below 15 -- meaning it could be over-valued by half -- while GDP chugs along at the same 2% its been at for the past 10 years.  Investors should be nervous.
  • Reply 20 of 27
    blastdoorblastdoor Posts: 2,360member
    It’s China’s overreaction that has the greater potential to hurt Apple and everyone else 
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