Last month, around 10,000 Foxconn workers walked off the job. Reports of casualties related to the strict lockdown in the factory that makes Apple (AAPL) iPhones triggered the exodus.
Last week, protests erupted when workers learned that Foxconn’s bonus payment will only apply to those who work the full contract length. Protests are a dangerous precedent For the Chinese government and Apple. Western media might intensify their coverage of the unrest at the factory. This could tarnish Apple’s image.
Foxconn’s supply disruption comes at the worst possible time for Apple. Consumers typically increase their spending on Apple devices during the holiday season. Expect output to fall by at least 5%. The optimistic investor might assume that consumers will delay their lost holiday sales until later. Still, inflation is only getting worse. Disposable income continues to decline. Apple risks losing device sales if consumers delay their purchases indefinitely.
Protests at Foxconn’s factories might shed more light on the working conditions of staff under a Covid lockdown. After China locked down Beijing again, investors will re-evaluate the risk the supply disruption has on Apple stock.
Apple trades at above-fair market valuations. The price-to-earnings ratio is around 25 times. The market capitalization is $2.4 trillion. A slowdown in device sales will force investors to avoid the stock at current prices.
