Mass production of Apple Inc.’s (NASDAQ: AAPL) new low-cost iPhone, as well as inventories of existing models, could be hit by the Covid-19 epidemic in China.

What Happened

The schedule for the production of Apple’s more affordable iPhone models may be derailed by the ongoing Covid-19 virus epidemic in China. Inventories of current models may also be negatively affected until April or even beyond, according to the Nikkei Asian Review.

Nikkei’s source said that the biggest uncertainty was whether Covid-19 was still “lingering.” The source expects more workers to return to production lines by next Monday.

A person who Nikkei claims has “direct knowledge of the matter” said that suppliers are “doing their best” to manufacture and ship the new low-cost version within four weeks. This person said that the delay would risk impacting the sales strategy of the new product lineup to be released by Apple in the second half of 2020.

Sources told the publication that suppliers in the iPhone supply chain are only producing at 30-50% capacity. They revealed that the “constrained” supply would extend to April or even beyond.

Why It Matters

Apple issued a statement on Monday admitting that its iPhone supply would be “temporarily constrained” at its manufacturing partner sites, which are located outside Hubei province.

The company said earlier that it expects to miss earnings guidance. China makes up 15% of Apple’s total revenue and is also the main hotspot for its global supply chain.

A new low-cost iPhone is important for Apple as it tries to revamp falling sales according to The Nikkei Asian Review. Apple had not launched a low-cost phone since the iPhone SE in 2016.

Price Action

Apple shares traded 0.24% higher at $319.75 in the after-hours session on Tuesday. The shares had closed the regular session 1.83% lower, at $319.

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