The Chinese city of Zhangzhou – home to Foxconn’s largest iPhone factory – has lifted COVID-19 restrictions, but it may still be too late to help Apple bounce back from a severe shortage of iPhone 14 Pro and Pro devices. Max during the holidays.
According to veteran Apple analyst Ming-Chi Kuo, fourth-quarter iPhone shipments could still be significantly reduced – Kuo is cutting 15-20 million devices from market estimates of 80-85 million units.
The plant shutdowns began in October alongside similar restrictions in nearby Zhangzhou (the restrictions lifted today were for a five-day period beginning last week) when several employees tested positive for the coronavirus. Foxconn responded by banning workers from public transportation and cafeterias and requiring them to travel only on certain marked routes.
Due to the restrictions, Kuo said the Zhengzhou iPhone factory’s average utilization rate was only 20 percent in November. He expects that to improve to 30-40% in December, although it’s unclear whether lifting the lockdowns would improve that rate.
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Since the Foxconn shutdowns began last month, protests have erupted at the Zhengzhou plant, with workers smashing windows and surveillance cameras, demanding payment and calling for better treatment of employees. Foxconn denied that the protests had any effect on production.
Kuo appears to believe otherwise and has reduced his iPhone prediction numbers based on the protests, he said.
According to the South China Morning Post, Foxconn typically hires about 300,000 people to handle the electronics rush during the holiday season, but the company has reportedly lost tens of thousands of employees since the shutdowns began.
Foxconn reportedly offered former factory workers return bonuses, promising ¥3,000 ($423) for those who stay 30 days, and an additional ¥3,000 for staying 26 days in December. Returning employees who show up for at least 23 days in January will receive an additional ¥6,000.
China in the rearview mirror
According to the SCMP, around 80% of base iPhone 14 devices are made at the Zhengzhou factory, and 85% of iPhone Pro devices are made there.
With so much production consolidated in one place and China’s lockdowns continuing to be severe, doing business in the country is increasingly questionable for big companies like Apple, which Kuo said could lose 20-30 % of their revenue in the fourth quarter due to the Foxconn fiasco. .
Apple has already begun to diversify its supply chain, and Foxconn has gone along with it, announcing an expansion of production capacity in India, where it already has factories, saying it plans to quadruple its workforce in the sub -continent.
According to Reuters, Apple has started moving production out of China. In 2019, between 44 and 47 percent of Apple’s suppliers produced goods in China, that figure fell to 41 percent in 2020 and 36 percent last year.
As mentioned above, reports arrived today that Zhengzhou has lifted its COVID-19 lockdown, which is certainly good news for Apple and eager holiday shoppers. At the time of writing, iPhone 14 Pro and Pro Max devices, regardless of configuration, are showing on Apple’s website as not shipping until December 30 at the earliest.
It’s unclear if Apple will be able to bounce back from iPhone production delays caused by the chaos in Zhengzhou in time for the holidays – we’ve asked Apple and will update this story as we get more information. ®
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