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Why Apple Stock Is Sinking Today

What happened 

The share price of Apple (AAPL -2.03%) was falling this morning after Bloomberg reported that the company could experience a shortfall of iPhone Pro production of up to 6 million phones. 

Apple had already announced earlier this month that one of its factories in China was operating at a “significantly reduced capacity” and this latest report adds to the company’s production issues in the country.

The tech stock was down by 1.7% as of 10:56 a.m. ET. 

So what

Citing a source with knowledge of assembly operations, the Bloomberg article said COVID-related unrest at a Foxconn (also known as Hon Hai Precision Industry) factory in Zhengzhou, China, is causing a production slowdown. 

China has implemented a strict zero-COVID policy over the past few years and new protests related to the restrictions have begun to flare up in the country. 

Foxconn’s factory experienced worker unrest in October as employees protested working conditions. 

That led Apple to release a statement at the beginning of this month, saying that its facility in Zhengzhou “is currently operating at significantly reduced capacity.” The slowdown in production mainly affects the Phone 14 Pro and iPhone 14 Pro Max models. 

But with today’s news, it’s clear that Apple is facing further production issues as China grapples with increasing anger toward its COVID restrictions. 

Now what 

The 6 million iPhone shortfall estimate could become larger if Foxconn can’t get workers back to the plant, according to Bloomberg, but the company could make up the difference with higher production levels in 2023. 

With China still trying to contain the coronavirus and refusing to back down from its strict lockdown policies, it’s clear that Apple and other companies will continue to experience production issues as long as the government sticks to its current policies. 

Chris Neiger has positions in Apple. The Motley Fool has positions in and recommends Apple. The Motley Fool recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.

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