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Benzinga
Benzinga
Business
Shanthi Rexaline

China Lockdowns Could Evolve As A 'Demand Problem' For Apple, Says Analyst

A renowned Apple Inc. (NASDAQ:AAPL) analyst on Wednesday suggested that the China COVID-19 lockdown situation could evolve more as a demand problem for the iPhone maker than as a production issue.

China's "zero-COVID" policy would have a more significant impact on the demand side than on the production side, TFI Securities analyst Ming-Chi Kuo said in a series of tweets.

"It's a potential system risk in [the second] half of 2022 for all brands and upstream suppliers," the analyst said.

Explaining his rationale, Kuo said demand-side risk occurs when consumption of essentials increases, leaving less to spend on consumer discretionary items such as consumer electronics.

Reacting to a Reuters report that said Hon Hai Precision Industry Co., Ltd. (OTC:HNHPF) isn't shutting down production at its facility in the COVID-19-hit Zhengzhou city, Kuo said if curbs in the city aren't lifted by June, iPhone 14 production may be impacted by logistics and workforce allocation.

Related Link: Apple Analyst Sees Limited Upside/Downside In Stock Until This Happens

Why It's Important: Apple has a rich launch pipeline scheduled for the second half of the year. The period is also traditionally stronger for the company, given it encompasses the back-to-school and holiday quarters.

The specter of lower output and softer demand, therefore, does not bode well for the company.

Price Action: Apple closed Wednesday's session 4.10% higher at $166.02, according to Benzinga Pro data.

Related Link: Apple Analyst Warns Of 'Considerable Risk' For Tech Sector In Coming Months

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