Hong Kong
CNN Business
—
The central Chinese city of Zhengzhou, home to the world’s largest iPhone factory, He has raised a five-day Covid lockdown, in a move that analysts have called much-needed relief for Apple and its main supplier Foxconn.
Zhengzhou is the site of “iPhone City,” a sprawling manufacturing campus owned by Taiwanese contract manufacturer Foxconn that normally houses about 200,000 workers who produce products for Apple.
(AAPL), including the iPhone 14 Pro and 14 Pro Max. Last Friday, the city locked their urban districts for five days as covid-19 cases increased there.
Local authorities also lifted lockdowns in four Guangzhou districts on Wednesday, Zhang Yi, a spokesman for the Guangzhou health commission, said at a press conference. The relaxation of restrictions. tax earlier this month at the manufacturing and transportation center came after residents clashed with police on Tuesday. Videos circulating on social media show residents chanting “lift the lockdown”.
Guangzhou will stop sending all close contacts of COVID-19 patients to central quarantine facilities and allow some to self-isolate at home, Zhang said. The city will also not launch any more borough-wide mass COVID-19 tests. “All districts should carry out tests in a scientific way,” Zhang added.
Foxconn’s massive facility is not part of Zhengzhou’s urban districts. However, analysts say the closure would have been detrimental to efforts to restore lost production on campus, the site of a violent labor revolt In the past week.
“This is good news in a dark storm for Cupertino,” Daniel Ives, managing director of equity research at Wedbush Securities, told CNN Business, referring to the California city where Apple is based. “There is a lot of heavy lifting ahead for Apple to get the factories back.”
Ives estimates that ongoing power outages at Foxconn’s Zhengzhou campus were costing Apple roughly $1 billion a week in lost iPhone sales. The troubles began in October when workers left the campus in Zhengzhou, the capital of central Henan province, due to Covid-related fears. Short-staffed, workers were offered bonuses to return.
But the protests erupted last week when newly hired staff said management had broken their promises. The workers, who clashed with security agents, eventually obtained cash to resign and leave.
Analysts said Foxconn’s production problems will accelerate the pace of supply chain diversification from China to countries like India.
Ming-Chi Kuo, an analyst at TF International Securities, wrote on social media which estimated iPhone shipments could be 20% lower than expected in the current October-December quarter. The Zhengzhou plant’s average capacity utilization rate was only about 20% in November, she said, and is expected to improve to 30-40% in December.
Total iPhone 14 Pro and 14 Pro Max shipments in the current quarter would be 15 to 20 million units less than previously forecast, according to Kuo. Due to the high price of the iPhone 14 Pro series, Apple’s overall iPhone revenue in the current holiday quarter could be 20-30% below investor expectations, he added.
— Laura He and Wayne Chang in Hong Kong and Xiaofei Xu in Paris contributed to this article.
