The news just keeps getting worse for Apple and its partners as the coronavirus continues to wreak havoc on the entire tech industry. But there is sign of hope.
First came word that the iPhone 9 could be delayed, which was originally expected to launch at the end of March at an Apple event. Given the cancellation of GDC and other events, we highly doubt Apple will host an event at this point.
And now it looks like that Apple is switching gears on a key component for the iPhone 12 as the company's overreliance on China has been called into question.
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You may not have heard of Yujingguang, but the company is known for producing the ultra-wide-angle camera lenses in the iPhone 11. And TF Securities analyst Min-Chi Kuo says that the company will be affected by the coronavirus along with other Apple supply chain partners.
First off, Kuo says in a research note that he believes that first-quarter revenue for the company will be “significantly lower than the market consensus.” The research note was originally reported on by AppleInsider.
More important, he predicts that Yujingguang will lose its exclusive status as the ultra-wide-camera lens provider for the iPhone 12. It’s now predicted that the company will secure only between 30% and 40% of the orders. Another company, Daliguang, will apparently obtain some of the orders.
In essence, Apple is being forced to diversify it component suppliers in order to attempt to keep the iPhone 12 launch on track, which will presumably take place in September.
Depending too much on China
A report in the Wall Street Journal says that some operations executives suggested in 2015 that the company relocate assembly of at least one product to Vietnam. This would have allowed Apple to create a “new cluster of component providers” outside of China. However, senior managers reportedly pushed back on the idea.
The two biggest reasons Apple has not had success manufacturing pones and components elsewhere in the world are scale and skill. China has the capacity for factories that can fit more than 250,000 people. In addition, other nations do not have the skilled labor required to aid Apple.
Apple has shifted AirPods Pro manufacturing from China to Vietnam, but the wireless earbuds apparently use about a third as many components as the iPhone. However, the WSJ report says that a plan to make the iPhone 11 in India failed due to a lack of skilled labor.
The iPhone 12 rush
Not much is known about the iPhone 12's camera system, but one rumor points to Apple adopting a new time-of-flight sensor that would be much more powerful than the TrueDepth sensor on the front of the current iPhones. This could be used for augmented reality applications, but it's not clear who would supply this component.
Apple had previously lowered its guidance on Feb. 17 for the second quarter due to the coronavirus outbreak. At the time, the company also said that worldwide iPhone supply would be “temporarily constrained.”
Since the coronavirus outbreak, the WSJ says that Apple’s market value has declined by more than $100 billion.
Foxconn returning to normal?
The good news is that Foxconn, Apple's biggest partner, says that it expects to resume normal production in China by the end of the March. According to a report in Reuters, Foxconn has warned that its revenue would drop 15% in businesses including consumer electronics and enterprise products in the first quarter.
A separate CNN report on Foxconn says that Foxconn was producing at about 50% of capacity as of Tuesday.
Coronavirus has killed more than 3,100 people so far and it has sickened nearly 91,000 people, the vast majority in China. There are more than 100 confirmed cases in the U.S.