Apple's Size Can't Provide Immunity Against Coronavirus Downdraft

Since announcing that they wouldn’t meet their sales estimates on February 17, Apple (NASDAQ: AAPL), the largest company in the US with a market value of nearly $1.3 trillion, has seen their shares tumble nearly 20%.

The company and its products are ubiquitous, but size and notoriety can’t stave off “supply chain disruption,” which has put sales at risk and exposed a vulnerability that will be difficult for Apple’s customers to ignore.

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Directly or indirectly, Apple relies on about 3 million people in China for its operations, according to a recent Wall Street Journal report. This includes everyone from the people who set tiny screws or thin printed circuit boards in the iPhone assembly process, to supervisors, engineers, administrators, and other personnel of every stripe. As the country shuts down, so does its workforce.

Yet, finding a similar pool of skilled and unskilled workers in any other country, with the attendant multi-year training and development of the needed component suppliers, strikes many industry observers as impossible. This also comes at a time when Apple is facing stiff competition in the Chinese market, notably from Huawei Technologies, which has been instrumental in reducing Apple’s overall market share.

As far back as 2015, some Apple employees were annoyed at the company’s reliance on China, but they’ve stayed the course which, with the benefit of hindsight, presented risks that were far too high. However, with $206 billion in cash on hand, Apple has the kind of resources to address the gaps in its supply chain strategy.