China’s Zhengzhou, home to world’s largest iPhone factory, ends Covid lockdown


Hongkong
CNN

The central Chinese city of Zhengzhou, home to the world’s largest iPhone factory, has lifted a five-day Covid-19 lockdown, a move analysts said was a much-needed relief for Apple and its main supplier, Foxconn.

Zhengzhou is home to “iPhone City,” a sprawling manufacturing complex owned by Taiwanese contract manufacturer Foxconn that typically houses about 200,000 workers and produces products for Apple (AAPL), including the iPhone 14 Pro and 14 Pro Max. On Friday, the city locked down its downtown area for five days amid a surge in Covid-19 cases.

Foxconn’s sprawling factory is not part of the city’s downtown area. Analysts, however, said the blockade would hamper efforts to restore lost production at the park, the site of a violent worker uprising last week.

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“This is some 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. “Apple has a lot of heavy lifting to do to restart its factories.”

Ives estimates that Apple is losing about $1 billion in lost iPhone sales per week due to ongoing supply disruptions at Foxconn’s Zhengzhou campus. The troubles began in October, when workers left the campus in Zhengzhou, the capital of central Henan province, out of Covid-related fears. Staff shortages, bonuses offered to workers to return.

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But protests erupted last week when new hires said management had reneged on their promises. Workers who clashed with security guards were eventually given cash to resign and leave.

Analysts say Foxconn’s production woes will accelerate efforts to diversify its supply chain away from China to countries such as India.

TF International Securities analyst Ming-Chi Kuo wrote on social media that he estimated that iPhone shipments could be 20% below expectations for the current October-December quarter. He said that the average capacity utilization rate of the Zhengzhou factory in November was only about 20%, and it is expected to increase to 30% to 40% in December.

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Kuo said combined iPhone 14 Pro and 14 Pro Max shipments for the quarter will be 15 million to 20 million fewer than previously expected. He added that Apple’s overall iPhone revenue for the current holiday quarter could be 20% to 30% lower than investor expectations due to the higher prices of the iPhone 14 Pro series.

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