Apple iPhone Production Could Drop by as Much as 30%, As China Tightens COVID-19 Curbs

(CTN News) – Due to increasing COVID-19 limitations in China, production of Apple Inc.’s (AAPL.O) iPhones might decline by as much as 30% at one of the largest manufacturers in the world starting next month, a source with direct knowledge of the situation said on Monday.

To make up for the shortage, the manufacturer Foxconn, formerly Hon Hai Precision Industry Co Ltd (2317.TW), is seeking to increase output at another facility in Shenzhen city, according to the individual, who declined to be named because the information was private.

Discontent over strict efforts to stop the spread of COVID-19 has rocked its major Zhengzhou factory in central China, which employs approximately 200,000 people. Several employees left the facility over the weekend.

The potential production effect comes at an often hectic period for electronics manufacturers before the year-end Christmas season, which is also a crucial time for vendors like Apple.

On Sunday, Foxconn said it was in charge of the issue and would coordinate backup production with other facilities to minimize possible damage. Compared to a 1.3% increase in the overall market, its share price decreased by 1.4% on Monday (.TWII).

An inquiry for comment from Apple was not answered.

Apple’s top iPhone manufacturer, Foxconn, accounts for 70% of all worldwide iPhone shipments and 45% of its revenues, according to Fubon Research in Taipei.

While the gadget is also built there, the bulk of the company’s production worldwide is put together at the Zhengzhou facility.

A second individual who knew the situation said that several employees were still present at the Zhengzhou site and that production was still underway.

Strict Covid-19 Measures

Localities are required to respond quickly to outbreaks, including measures such as full-scale lockdowns, by China’s very rigorous zero-COVID-19 rules.

A “closed loop” approach, in which employees live and work on-site, is sometimes required for factories in impacted regions to be permitted to remain operational. According to businesses, such agreements provide several challenges.

On October 19, Foxconn ordered employees at the Zhengzhou facility to stop eating at the canteens and eat all meals in the dorms instead. The output, it stated, was typical.

People who claimed to work at the location expressed anger over the measures and how they were treated and provided for on social media.

Photographs and videos posted on social media purportedly show Foxconn employees walking across fields during the day and along highways at night as they allegedly evacuated the site over the weekend. Reuters was unable to quickly confirm the postings’ veracity.

If any employees at the Zhengzhou location have been diagnosed with COVID-19, Foxconn has not acknowledged it. Since October 19, authorities in Zhengzhou, the provincial capital of central Henan, have recorded 264 locally transmitted COVID-19 cases.

Foxconn adopted closed-loop controls at its smaller Shenzhen facility in March and July of this year as the number of cases in the southern metropolis increased.

Although a closed-loop system had been implemented, worker turmoil resulted from the discovery of COVID-19 instances in May at the Shanghai facility of another Apple supplier, MacBook assembly Quanta Computer Inc (2382.TW).

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