Coronavirus hits Apple revenue target, puts Indian imports at risk | Latest News India - Hindustan Times
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Coronavirus hits Apple revenue target, puts Indian imports at risk

Hindustan Times, New Delhi | By
Feb 18, 2020 01:06 PM IST

On Monday, tech major Apple Inc warned it was unlikely to meet a sales target set just three weeks ago amid lost production and weakening demand in China in the wake of the coronavirus outbreak, Reuters reported.

The coronavirus epidemic which has hit the Chinese economy hard is beginning to bite foreign companies operating in that country and can potentially also hurt India with almost 14% of its imports from China at risk.

(FILES) In this file photo taken on February 8, 2020 a man cycles past a closed Apple store in Beijing. China accounted for 15% of Apple’s revenue, or $13.6 billion, last quarter, and supplied 18% of revenue in the year-ago quarter.(AFP FIILE)
(FILES) In this file photo taken on February 8, 2020 a man cycles past a closed Apple store in Beijing. China accounted for 15% of Apple’s revenue, or $13.6 billion, last quarter, and supplied 18% of revenue in the year-ago quarter.(AFP FIILE)

On Monday, tech major Apple Inc warned it was unlikely to meet a sales target set just three weeks ago amid lost production and weakening demand in China in the wake of the coronavirus outbreak, Reuters reported.

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Some of Apple’s retail stores in China remain closed or are operating at reduced hours, which will hurt sales this quarter. China accounted for 15% of Apple’s revenue, or $13.6 billion, last quarter, and supplied 18% of revenue in the year-ago quarter.

In late January, Apple had forecast $63 billion to $67 billion in revenue for the quarter ending in March. It did not offer a new revenue estimate nor provide a profit forecast on Monday.

Analysts have estimated that the virus may slash demand for smartphones by half in the first quarter in China, the world’s biggest market for the devices.

“The magnitude of this impact to miss its revenue guidance midway through February is clearly worse than feared,” Wedbush analyst Daniel Ives wrote in a note.

“The health and well-being of every person who helps make these products possible is our paramount priority,” Apple Chief Executive Tim Cook said in a statement released by Apple.

Manufacturing facilities in China that produce Apple’s iPhone and other electronics have begun to reopen, but they are ramping up more slowly than expected, Apple said. That will mean fewer iPhones available for sale around the world, making Apple one of the largest Western firms to be hurt by the outbreak.

Fiat Chrysler, Hyundai Motor Co and General Motors Co have said their auto production lines were, or could be, hit by Chinese factories that are slow to restart because of the virus.

The coronavirus epidemic has unleashed a massive disruption of economic activity. Retail car sales fell 22% to 1.71 million units, the biggest-ever drop for the month of January, Bloomberg reported. According to the China Passenger Car Association, February sales could drop 30%, it said.

The epidemic has claimed more than 1,800 lives so far and more than 72,000 people have been stricken and millions of others confined to their homes. Factories have been slow to reopen after the Chinese New Year holiday break was extended due to the virus.

There are now fears that any major disruption in the Chinese economy can hit supply chains in India. China has been India’s largest source of imports since 2004-05, according to data from the Centre for Monitoring Indian Economy (CMIE). In 2018-19, the latest period for which annual data is available, it had a share of 13.7% in India’s total imports.

An analysis of the World Bank’s World Integrated Trade Solution (WITS) database shows that Chinese imports had an average share of almost 40% in India’s total capital goods imports, one-fifth of consumer goods imports; and 15% of intermediate goods imports, according to an analysis of import data from 2014 to 2018.

This means that any major disruption in production in China will adversely impact investment, supply chains as well as manufacturing and supply of consumer goods. This can lead to both short-term and long-term problems in the economy.

Price rise could be a fallout of the economic disruption. Tim Nicolle, Founder and CEO, PrimaDollar, a trade finance platform, said: “Can this lead to a rise in prices? Yes, this is the most likely result of interruptions in supply. Moreover, it will also lead to rising interest rates because the policy response to supply-shortage inflation is to dampen demand. Again, let us hope we are wrong, but the data points so far suggest this is direction of travel.”

China is also an important export market for India. According to CMIE, China was India’s third largest export market, after the US and the United Arab Emirates in 2018-19. In the case of exports, raw material producers would be the worst hit if the Chinese economy does not recover from the Coronavirus disruption soon. A five-year average of India’s exports to China shows that China had a 10.03% share of total raw material exports from India.

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