The red flag: Apple's problems in China

$Taiwan Semiconductor(TSM.US)$ $Apple(AAPL.US)$ TSMC's largest customer accounted for 26% of its revenue in 2021. TSMC didn't specifically name that customer in its latest annual report, but it's widely believed to be Apple. Therefore, the Mac maker's recent problems in China could generate significant headwinds for TSMC's near-term growth.

Last month, violent protests erupted at Foxconn's largest iPhone manufacturing plant in China in response to the facility's rigid COVID-19 policies and unpaid bonuses. Those disruptions have reportedly reduced the plant's November production by more than 30%, which will likely throttle Apple's available supply of iPhones throughout the holiday season.

But that's not all. Other protests subsequently erupted across China in response to the government's draconian "zero-COVID" policies, and that ongoing social unrest could impact Apple's sales across the "Greater China" region, which accounted for 19% of its top line in fiscal 2022 (ended in September). And that, in turn, could take a toll on TSMC.