Apple announced that, out of an “abundance of caution,” it has closed all stores, corporate offices and contact centers in China through February 9. These closings overlap with the back half of the Chinese new year (January 25th – February 8th), which will soften the financial impact.
The bottom line: assuming history repeats itself and the Coronavirus is brought under control, the Apple China story will return to a be measurable net positive.
- Most importantly, there is the human impact in play, which is an important place to start, given it puts the significance of the financial impact into perspective.
- Setting aside the human impact, the financial impact on Apple’s business is fractional. We estimate these closings will have a negative $100m impact on revenue in the Mar-20 quarter or just under 1% of greater China revenue. As mentioned, the timing of the Chinese new year may soften that impact.
- Apple has 42 stores in China, and we estimate generate between 8-10% of Greater China revenue in a given quarter. In the most recent quarter, 15% of revenue came from Greater China.
- That said, investor psychology may be more materially affected in the near term, given closings could stoke investor concern that the scope of the Coronavirus impact on Apple’s business is unknown.
- This is another example that shows that China headlines on Apple’s business cut both ways because the company has the largest exposure to China of any US tech company. On the negative side, the company was in the vortex of the trade dispute and now the Coronavirus. We see the positive side carrying greater weight, that China will be the biggest or second-biggest (behind India) tech growth market for the next decade, and Apple is better positioned than any other US tech company to capitalize on it.