WEBVTT - Vlad Savov on Apple iPhone (Audio)

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<v Speaker 1>Let's get now to Lad sever of Bloomberg Tech editor

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<v Speaker 1>joining us from Tokyo. With Apple cutting its outlook for

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<v Speaker 1>iPhone shipments after China lockdowns affected operations at a supplier's factory.

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<v Speaker 1>So the disruption coming at a bit of a crucial

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<v Speaker 1>time for Apple. Lad. But is it really that we

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<v Speaker 1>are not seeing demand or is it just the fact

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<v Speaker 1>that these lockdowns are really going to affect operations and

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<v Speaker 1>production and rollout of the new iPhones. It isn't the

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<v Speaker 1>crucial time. This is the peak season for iPhone production.

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<v Speaker 1>The company foxcon It's main supplier. They're both building up

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<v Speaker 1>for the holiday shopping season. There are holiday festivals such

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<v Speaker 1>as November leventh in China. Now, the mix of supply

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<v Speaker 1>and demand that is really the tricky question here. Um.

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<v Speaker 1>If you look at analysts addressing specifically the China market

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<v Speaker 1>is the biggest model market in the world, they are

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<v Speaker 1>seeing Apple's iPhones sales dropping at an accelerating rate, much

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<v Speaker 1>more so than in previous years. And there is strong

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<v Speaker 1>indication that the regular non pro models um I thinking

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<v Speaker 1>a lot lower demand this and it has to do

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<v Speaker 1>a lot with China's own economy and the global economy

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<v Speaker 1>is sewing down. What Apple said in this statement with

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<v Speaker 1>with this production disruption is that it is still seeing

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<v Speaker 1>strong demands for the iPhone Forward in Pro and I

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<v Speaker 1>Refording Promax. These are the models that are manufactured at

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<v Speaker 1>that Jango facility which is currently on the lockdown. UM.

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<v Speaker 1>But the company and Foxcone itself are saying the bringing

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<v Speaker 1>optimistic notes so to say that the current lockdown is

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<v Speaker 1>scheduled to end on November ninth, UM and after it

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<v Speaker 1>they should be able to get back on track. Um.

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<v Speaker 1>They speak more about delays two people's orders rather than

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<v Speaker 1>so much uh losing shipments over the first quarter. So

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<v Speaker 1>is this a story then that is just going to

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<v Speaker 1>be of of the fourth quarter and potentially the first

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<v Speaker 1>quarter if we do start to see a relaxation of

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<v Speaker 1>COVID zero rules. What is Hornhei telling us about their

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<v Speaker 1>outlook for the quarter? It's uncertain. Um, As you say,

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<v Speaker 1>nobody really has a great idea, because I mean, this

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<v Speaker 1>is lockdown and came out of nowhere. It wasn't in advance.

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<v Speaker 1>It was an action that actually followed some disruption and

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<v Speaker 1>the facility itself because Harnhei wasn't able to manage it.

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<v Speaker 1>Uh in an ideal fashion. So these disruptions, the really

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<v Speaker 1>tweecky thing with them is that uncertainty. Uh in terms

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<v Speaker 1>of when we start to see I guess a little

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<v Speaker 1>bit more of a pickup. We know that Apple has

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<v Speaker 1>has paused hiring for many jobs outside research and development.

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<v Speaker 1>We're talking about these Wall Street Journal reports of Meata,

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<v Speaker 1>you know, pausing hiring too, and other job cuts coming

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<v Speaker 1>through in the tech space. How much of a slowdown

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<v Speaker 1>are you hearing is happening in the tech sector regardless

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<v Speaker 1>of the lockdowns in China. Um, well, it's exactly to say,

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<v Speaker 1>it does seem to be reaching all over the industry. UM.

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<v Speaker 1>I suppose if there is going to be any sort

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<v Speaker 1>of tonic is going to be all the Twitter engineers

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<v Speaker 1>are now currently available and probably really easy to hire

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<v Speaker 1>for other companies. But aside from and um, there is

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<v Speaker 1>that the stronger focus on efficiency of spending where there

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<v Speaker 1>it is, as you say, Apple, Meta, etcetera. UM. For

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<v Speaker 1>Apple and folks colon specifically, they will be hoping for

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<v Speaker 1>this issue, at least on the supply side, to be

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<v Speaker 1>resolved much sooner than the first quarter. But then the

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<v Speaker 1>man side is really going to be tied into the

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<v Speaker 1>global economy and consumer sentiments. TAG and consumer electronics are

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<v Speaker 1>very much tied to that. The iPhone is kind of

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<v Speaker 1>a bare weather for that. If things are going great,

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<v Speaker 1>you'll see more iPhone sales. If they're not, people suffer

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<v Speaker 1>as well. Yeah, in terms of also the impact of

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<v Speaker 1>China's lockdowns and the impact that it's having on its

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<v Speaker 1>own economy and company's desire to actually manufacture there, we

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<v Speaker 1>saw Apple adding that new iPhone fourteen maker in India.

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<v Speaker 1>How much of a shift do you think that we

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<v Speaker 1>are going to see Apple gradually diversify the geography here

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<v Speaker 1>of a supply chain. That's right, That's right Apple again,

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<v Speaker 1>UM for force in production with Pegotron, another one of

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<v Speaker 1>his Taiwanese partners in India. And it's worth saying this

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<v Speaker 1>wasn't triggered just by the current issues. It's these are

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<v Speaker 1>things that I planned months and months, maybe years in advance. UM.

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<v Speaker 1>It has accelerated this year. Specifically India production of the

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<v Speaker 1>iPhone came only weeks UM a few weeks after the

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<v Speaker 1>launch and very close to the start of China production,

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<v Speaker 1>which is much much improved on previous years. We can

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<v Speaker 1>probably anticipate that growing India is really pushing to bring

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<v Speaker 1>in small phone manufacturing, electronics manufacturing within its borders. And

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<v Speaker 1>the iPhone is the thing that everyone wants to have

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<v Speaker 1>and and it is putting forward financial incentives for the

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<v Speaker 1>likes of Pegotron and fox Con to put more production there.

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<v Speaker 1>And let's be fair, um, the current lockdowns and situations

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<v Speaker 1>in China, they probably not Jappo in that direction too.

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<v Speaker 1>And just a very quick final word, I mean you

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<v Speaker 1>mentioned it's a bit of an indicator because if people

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<v Speaker 1>are buying a new iPhone, then they're doing okay. If

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<v Speaker 1>they're not, then they are worried about the future. What's

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<v Speaker 1>the kind of I guess earnings outlook that you're seeing

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<v Speaker 1>or hearing from analysts. You put it really nicely there,

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<v Speaker 1>but by the way, better than I did earnings outlook

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<v Speaker 1>for for Apple and elsewhere. I mean, at the moment,

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<v Speaker 1>just because of the redundancy and the strength of Apple

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<v Speaker 1>supply chain systems, UM, I wouldn't expect like a huge

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<v Speaker 1>drop off just because of these current lockdowns. There is redundancy,

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<v Speaker 1>especially for the regular iforms rather than the pro models. UM,

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<v Speaker 1>so we we can again, I would actually lean back

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<v Speaker 1>to uncertainty. There is a lot of uncertainty going forward. Alright,

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<v Speaker 1>flat always a pleasure of Lad Sapper of Bloomberg Tech

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<v Speaker 1>Editor with us from Tokyo,