How China "zero COVID" protests affect companies like Apple
International companies with ties to China are closely monitoring the sudden surge of protests in the country over the government's "zero COVID" stance — particularly if the unrest leads to any policy changes.
Why it matters: The restrictions have kept the pandemic in check in China for a long time — but they've also had sweeping implications for businesses, undermining domestic consumer demand and triggering production shortfalls in international supply chains.
Zoom out: Analysts say Chinese authorities are stuck in an uncomfortable spot, not wanting to back down from their position while also needing to ensure that the unrest doesn't spread.
- "The economic outlook is terrible, whatever the authorities now do," Capital Economics chief Asia economist Mark Williams wrote Monday.
The latest: Chinese state media continued to praise zero-COVID measures on Monday, signaling no change in official policy, Axios' Bethany Allen-Ebrahimian writes.
The impact: If China were to respond to the protests by easing restrictions, Apple would be among the first to benefit.
- The tech giant is reportedly facing significant supply shortages in its iPhone line due to ongoing lockdowns and labor unrest at a key manufacturing facility.
- Wedbush Securities analyst Dan Ives said Monday in a research note that "many Apple stores" have only 35% to 40% of typical inventory of the iPhone 14 Pro.
- "The zero China Covid policy has been an absolute gut punch to Apple's supply chain with the Foxconn protests in Zhengzhou a black eye for both Apple and Foxconn," Ives wrote.
The bottom line: International companies with the biggest investments in China face the most risk if the country refuses to budge, Niagara University economist Tenpao Lee tells Axios.
- "Economically there are incentives for companies to move production out of China in order to save production costs," Lee says.
- Apple, for example, has already taken steps to shift some production to India.
- "But this is a long term situation," Lee says. "It’s not going to happen in one year."