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Apple could be short of iPhone Pros this holiday season

Protests against COVID measures spread to China's biggest cities

Apple shares sank on Monday after a new report revealed that iPhone Pro production this holiday season could fall short by as many as 6 million units.

Bloomberg reported that tumult at Zhengzhou, a key manufacturing hub for Apple in China, would likely lead to a massive shortfall of its signature smartphone, citing an unnamed source. The reporting confirmed previous estimates from Morgan Stanley and Wedbush that the iPhone maker was falling short in its production goals this holiday season. 

"In many Apple stores we are seeing major iPhone 14 Pro shortages of up to 35%-40% of typical inventory heading into December with online channels pushing deliveries into early January in many cases," Wedbush analysts said in a research note Monday. They estimated that shortages could reduce the number of iPhones sold this quarter by 5% to 10%.

Apple did not respond to a request for comment. Shares of the tech giant fell $4.34, or 2.9%, to $143.78 in afternoon trading.

Why the production problems? Blame COVID-19, which is surging in China and slowing work at FoxConn, the electronics manufacturer that assembles iPhones for Apple. Meanwhile, residents are protesting the residential and business shutdowns under the nation's "zero-COVID" policy, with protests spreading to major cities and even leading to calls for President Xi Jinping to step down.

"With the 'head scratching' zero-COVID policy in China now reaching a tipping point and protests across the country, Apple is essentially caught in the cross-fire heading into the all-important Christmas time period," Wedbush analysts said. 

The nationwide demonstrations come after weeks of worker unrest at FoxConn. Last week, a dispute over pay at the company's factory in Zhengzou in central China sparked employee protests that led to a police showdown in which some demonstrators were beaten. Workers have also chafed against quarantine practices due to strict COVID policies, Bloomberg noted.

The Taiwanese company was forced to apologize on Thursday, blaming the pay dispute on a "technical error" in adding new employees after an October exodus of thousands of employees over what they said were unsafe working conditions.

Apple could still increase production in the coming weeks to try to make up some of the shortfall, Wedbush noted.

"Now it's the painful waiting game to see what ramped production looks like over the next week for Apple to ease some iPhone shortages that are building globally," the analysts said. 

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