Foxconn unrest threatens iPhone shipments and weighs on Apple shares

TAIPEI, Nov 25 (Reuters) – Foxconn’s (2317.TW) flagship iPhone factory in China is expected to see a further reduction in November shipments after the latest bout of social unrest this week, a source directly told the media on Friday. current of the case. , while thousands of employees resigned.

The world’s largest Apple iPhone factory (AAPL.O) is grappling with strict COVID-19 restrictions that have fueled worker discontent and disrupted production ahead of January’s Christmas and Lunar New Year holidays , as many workers were isolated or fled the plant.

Following Wednesday’s escalation which saw workers clash with security personnel, Foxconn could now see more than 30% of the site’s production in November affected, compared to an internal estimate of up to 30% when the Labor issues erupted in late October, the source said.

The factory is the only one making high-end iPhone models, including the iPhone 14 Pro, and the source said it’s unlikely to resume full production by the end of this month.

Foxconn, officially known as Hon Hai Precision Industry Co, declined to comment. Apple, which said Thursday it has staff at the factory, did not respond to a request for comment on Friday.

“Worker unrest at the Foxconn factory in China could weigh on Apple’s iPhone shipments in November,” Victoria Scholar, chief investment officer at Interactive Investor, said as concerns grew over capacity. of Apple to deliver products during the busy holiday period.

Apple shares were down 1.9% late Friday morning, while the benchmark Nasdaq index was down 0.3%.

“Apple is still considered one of the most resilient stocks in the technology sector…However, Apple continues to refrain from providing official guidance given the macroeconomic uncertainty,” Scholar added.

US Best Buy Co Inc said on Tuesday it expects high-end iPhones to be scarce in stores this holiday season. Analysts said iPhones at Apple stores in the United States during the Black Friday shopping season were also down from a year earlier, and it was taking longer to replenish inventory, reported Reuters this week.

REDUCED SHIPMENTS

KGI Securities analyst Christine Wang said that if the current problem lasts until December, around 10 million iPhone production units would be lost, which would translate into a 12% drop in iPhone shipments. iPhone in the last quarter of 2022.

Wedbush Securities estimates that many Apple stores now have 25% to 30% fewer iPhone 14 Pros than normal as the holiday shopping season approaches.

In a Nov. 7 statement, Apple said it expects lower-than-expected iPhone 14 Pro and iPhone 14 Pro Max shipments.

Some new recruits hired by Foxconn in recent weeks have claimed they were misled about factory pay, and others have complained about sharing dormitories with co-workers who tested positive for COVID.

Foxconn apologized on Thursday for a “technical error” over hiring pay and later offered 10,000 yuan ($1,400) to protesting new hires who agreed to quit and leave.

The source said more than 20,000 workers, mostly new recruits who were not yet working on the production lines, took the money and left. Videos posted Friday on Chinese social media showed crowds and long lines of luggage-laden workers queuing for buses.

“Time to go home,” one person posted.

The factory, before its difficulties began, employed more than 200,000 people. It has dormitories, restaurants, basketball courts, and a soccer field across its sprawling facility of approximately 1.4 million square meters (15 million square feet).

Another Foxconn source familiar with the matter said some new recruits had left campus but did not specify how many. This person said that because the people leaving had not yet been trained or started working, their departures would not cause further damage to current production.

“The incident has a large impact on our public image but little on our (current) capacity. Our current capacity is not affected,” the source said.

“There’s not much companies can do about pandemic prevention…It’s been a problem for a while. It’s a problem everyone is facing,” the person said, pointing out others worker unrest triggered by rigid COVID restrictions, including upheavals at another. Apple’s supplier, Quanta (2382.TW), in May.

Shares of Foxconn closed 0.5% lower, lagging the broader market (.TWII) which ended flat.

($1 = 7.1616 Chinese yuan renminbi)

Reporting by Yimou Lee; Additional reporting by Brenda Goh and Johann M Cherian, Tiyashi Datta and Aditya Soni in Bengaluru; Editing by William Mallard, Gerry Doyle, Elaine Hardcastle

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