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By the third quarter of last year, there were few places that tech could hide from the stock wipeout. Apple was one such rare haven among Big Tech that continued to outperform other mega-caps. By November, Apple’s valuation touched approximately USD 2.3 trillion and, albeit for a brief period, surpassed the combined valuation of Alphabet, Amazon and Meta, all of which put up a poor show in the fourth quarter.
Steep decline in valuation
However, what wasn’t as apparent was that Apple’s valuation was also on a decline. At the end of 2021, the company was valued at USD 2.9 trillion, hitting the USD 3 trillion zenith valuation in January last year. Now in the first month of 2023, Apple’s problems had caught up with its valuation falling below USD 2 trillion. The iPhone-maker had slipped from being the world’s most valuable company with global online retailer Amazon taking the pole position now.
Apple’s lack of dependency is a constant asset that has prevented it from a total washout during results. For its fourth-quarter, Apple had reported revenue of USD 90.15 billion as compared to USD 83.6 billion in the same quarter last year showing an increase of 8.1%. The revenue had surpassed analyst expectations of USD 88.90 billion.
Massive shift in production
The symptoms of China’s COVID-19 lockdown have regardless showed up and crippled the company’s supply chain production. Apple’s Foxconn factory in Zhengzhou had failed to meet production goals due to worker protests at the site over non-payment issues.
Zhengzhou was critical for Apple since it produces the maximum number of iPhones. According to reports Apple might be facing a shortage of six million iPhone Pro units currently, which could lead to lower revenue in its first-quarter earnings show expected on February 2.
Since Foxconn produces approximately 70% of iPhones, Apple is scampering to shift its production to other countries like India and Vietnam. Piyush Goyal, India’s minister of commerce and industry, this week spoke about Apple ramping up manufacturing 25% of all its iPhones in India. Last year, the company began assembling its flagship iPhone 14 in India, marking the first time it was producing its latest model in the country. Until then, Apple usually relied on India to produce their older models.
However, the truth behind moving factory production is that these things are hardly finished in the blink of an eye. It can potentially take years and billions of dollars to move its hub for iPhone production from China to India. The cost of this massive shift and fears of fall in production will be a heavy burden to bear for investors, combined with the macroeconomic headwinds already in play.
Sole survivor amid layoffs
Despite the problems, Apple has managed something not many in its category have – the company has been able to avoid mass layoffs unlike other tech giants like Amazon, Alphabet, Microsoft and Meta. Alphabet has cut 12,000 jobs, Microsoft laid off 10,000, while Amazon has seen 18,000 layoffs and Meta has let go of 11,000 employees.
The reason behind this doesn’t take a whole lot of number-crunching. Apple has been sufficiently precautionary in the middle of the pandemic. In fact, the company’s hiring has maintained a sustained trend since 2016. The company’s employee count, which stood at 164,000 around September 2022, had grown only by 6.5% from the same time in 2021. The company had also hired steadily in 2020, adding approximately 7,000 employees.
In contrast, the unexpected tech boom during the pandemic led to massive over-hiring in the sector. Microsoft saw a 40,000 employee jump from 2021 which was a 22% increase in staff numbers. In 2020, Microsoft employees had increased by 11%. Amazon added 310,000 jobs in 2021 and half a million jobs in 2020 with a 38% increase in employees.
Meta, formerly Facebook, which is in the middle of a risky transition in its business, added over 13,000 employees in 2020 – its biggest year in hiring. In 2021, it grew by another 13,000 workers. Alphabet added over 21,000 employees in 2021 which is a 15% increase. In 2020, the company added over 16,000 employees, a nearly 14% growth.
For all its worries, Apple has managed to more than stay afloat over the past few years. The demand for Apple’s products continues to be strong with sales having grown from USD 275 billion in 2020 to USD 400 billion in 2022, which is remarkable for a company of this size. And demand outstripping supply is a problem that any tech company would like to have now.
