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EXCLUSIVE: Apple iPhone output at major Chinese plant could drop by 30% amid Covid restrictions

EXCLUSIVE: Apple iPhone output at major Chinese plant could drop by 30% amid Covid restrictions
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TAIPEI, Oct 31 (Reuters) – Apple Inc’s manufacturing (AAPL.O) iPhones at one of the world’s largest factories could drop as much as 30% next month as China tightens COVID-19 curbs, a person with direct knowledge of the matter said Monday.

The manufacturer is Foxconn, officially Hon Hai Precision Industry Co Ltd (2317.TW)Another factory in the city of Shenzhen is working to ramp up production to cover the shortfall, said the person, who declined to be identified as the information was personal.

Its main Zhengzhou plant in central China, which employs about 200,000 people, has been rocked by discontent over strict measures to curb the spread of COVID-19, with several workers fleeing the site over the weekend. Read more

The potential impact on manufacturing comes during a traditionally busy period for electronics makers ahead of the year-end holiday season, which is also a prime time for vendors such as Apple.

Foxconn said on Sunday it was bringing the situation under control and would coordinate back-up production with other plants to minimize the potential impact. Its shares fell 1.4% on Monday, against a 1.3% rise in the broader market (.TWII). Read more

Apple did not respond to requests for comment.

Foxconn is Apple’s largest iPhone maker, producing 70% of worldwide iPhone shipments, which generate 45% of the Taiwanese firm’s revenue, analysts at Taipei-based Fubon Research said this month.

It also manufactures the device in India, but its Zhengzhou factory assembles the bulk of its global output.

A second person familiar with the situation said many workers remained at the Zhengzhou plant and production continued.

Strict COVID-19 measures

Under China’s ultra-strict zero-COVID-19 policy, localities must act quickly to contain outbreaks, including measures including full-scale lockdowns.

Factories in affected areas are often allowed to remain open on the condition that they operate under a “closed loop” system where workers live and work on site. Traders say that such a system causes a lot of inconvenience.

Foxconn banned food in the Zhengzhou plant’s canteen on October 19 and forced workers to eat in their dormitories. It said production was normal.

The moves led to people who said they worked at the site expressing frustration about their treatment and provisions via social media.

Scores fled the site over the weekend, with photographs and videos on social media showing Foxconn workers tracking roadsides day and night. Reuters could not immediately verify the authenticity of the posts. Read more

Foxconn has not disclosed whether any workers at the Zhengzhou site have contracted COVID-19. Since Oct. 19, authorities in Zhengzhou, the capital of central Henan province, have reported 264 local Covid-19 infections.

Foxconn implemented closed-loop measures at its small Shenzhen factory in March and July this year as cases surged in the southern city.

In May, the Shanghai plant of another Apple supplier, MacBook assembler Quanta Computer Inc. (2382.TW)Despite the establishment of a closed-loop system, it also suffered from staff disruption after the discovery of the COVID-19 case. Read more

(This story has been refiled to correct the headline to clarify that the figure applies to output at a single factory)

Reporting by Yimou Lee; Additional reporting by Brenda Goh; Edited by Gerry Doyle and Christopher Cushing

Our values: Thomson Reuters Trust Policy.

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