What happened
Shares of Apple (AAPL 0.92%) fell 2.7% on Monday after a key supplier suspended some of its manufacturing operations in China.
So what
An omicron-related surge in COVID-19 infections prompted the Chinese government to impose new restrictions to stem the outbreak. The lockdowns led Foxconn Technology to cease production at its facilities in Shenzhen, China where it manufactures iPhones and iPads.
Apple could face new production problems due to COVID-19. Image source: Getty Images.
Like many technology companies, Apple has struggled to overcome supply chain bottlenecks during the pandemic. Chip shortages and other supply constraints have driven up Apple's production costs and resulted in lost sales in recent years. Prolonged lockdowns in China could exacerbate these challenges.
Foxconn, for its part, intends to shift production to its other facilities to minimize the disruption caused by coronavirus-related shutdowns.
Now what
Wall Street doesn't appear to be overly concerned as of yet.
"With the March quarter typically being a lower seasonal quarter, we believe any impact on production from the Shenzhen facility could be transferred to other sites, leaving limited impact," Piper Sandler analyst Harsh Kumar said.
Still, investors should be aware that sustained lockdowns could dent Apple's results in the coming quarters.
"If this lasts more than a week it will take off 1% of iPhone production every week at a time the supply chain is already under hurricane-like headwinds," Wedbush analyst Dan Ives said in a statement to Barron's.
