A source with a direct understanding of the situation said on Monday that increasing COVID-19 limitations in China might cause the production of Apple Inc.’s (AAPL.O) iPhones to decline by as much as 30% at one of the largest plants in the world starting next month.
According to the person, who requested anonymity because the information was private, the manufacturer Foxconn, formerly Hon Hai Precision Industry Co Ltd (2317.TW), is attempting to increase output at another facility in Shenzhen city to fill up for the shortage.
With numerous employees leaving the facility over the weekend, its flagship Zhengzhou operation in central China, which serves nearly 200,000 people, has been rocked by unrest over strict efforts to stop the spread of COVID-19.
The potential production impact comes at a time when electronics manufacturers are often busy before the year-end festive season, which is also a busy period for vendors like Apple.
On Sunday, Foxconn declared that it had the issue under control and it would work with other plants to organise backup production to lessen any potential effects. On Monday, its stock price ended down 1.4% compared to the market as a whole, which rose 1.3%. (.TWII).
A request for clarification from Apple was ignored.
Experts at Taipei-based Fubon Research claimed Foxconn produces 70% of Apple’s global iPhone shipments, which accounts for 45% of the Taiwanese company’s income.
It also manufactures the devices in India, although the majority of its production worldwide is put together in the Zhengzhou factory.
Numerous employees were still present at the Zhengzhou plant. A second source unveiled that production was still underway.
Localities are required to take immediate action to contain epidemics under China’s extremely severe zero-COVID-19 rules, including full-scale lockdowns.
Factories in impacted areas are frequently permitted to remain open as long as they employ a “closed loop” approach where employees live and work on-site. Businesses claim that these arrangements present a number of challenges.
On October 19, Foxconn prohibited eating at the plant’s canteens in Zhengzhou and mandated that staff members have their meals in the dorms. Production was described as usual.
People who claimed to work at the location expressed their annoyance with the measures and their treatment and amenities on social media as a result of the measures.
Numerous people left the site during the weekend, and social media posts allegedly show Foxconn employees walking across fields during the day and along highways at night.
The posts’ veracity could not be readily confirmed.
If any employees at the Zhengzhou location have been diagnosed with COVID-19, Foxconn has not made that information public.
In Zhengzhou, the provincial capital of central Henan, the authorities have reported 264 domestically transmitted COVID-19 episodes since October 19.
At its smaller Shenzhen factory, Foxconn implemented closed-loop controls in March and July of this year as cases in the southern city increased.
Despite having a closed-loop system in place, in May, the Shanghai facility of another Apple supply source, MacBook assembly Quanta Computer Inc (2382.TW), was likewise plagued by worker pandemonium following the discovery of COVID-19 cases.