Production of Apple Inc’s (AAPL.O) iPhones could fall by as much as 30% at one of the world’s largest factories in November owing to tightening COVID-19 restrictions in China, a person with firsthand knowledge of the matter said on Monday.
Manufacturer Foxconn, formally Hon Hai Precision Industry Co Ltd (2317.TW), is struggling to increase production at another factory in Shenzhen city to compensate for the shortfall, said the person, refusing to be named as the information was confidential.
Its main Zhengzhou factory in central China, which has a workforce of about 200,000 people, has been rocked by discontent over strict measures to control the spread of COVID-19, with several employees breaking out of the site over the weekend.
The potential impact on production comes amid a traditionally busy time for electronics makers prior to the year-end holiday season, which is also a peak time for vendors such as Apple.
Foxconn on Sunday said it was keeping a lid on the situation and would coordinate back-up production with other plants to lower any possible impact. Its share price ended down 1.4% on Monday against a 1.3% rise in the broader market (.TWII).
Apple failed to reply to a request for comment.
Foxconn is Apple’s largest iPhone maker, making 70% of iPhone shipments worldwide, which in turn accounts for 45% of the Taiwanese firm’s revenue, analysts at Taipei-based Fubon Research said in October. It also produces the device in India, but its Zhengzhou factory assembles the bulk of its global output.
A second person with knowledge about the situation said many employees stayed at the Zhengzhou plant and that production was going on.
Strict COVID-19 Measures
Under China’s ultra-strict zero-COVID-19 policies, localities must act quickly to curb flare-ups, with measures including full-scale lockdowns.
Factories in affected areas are usually permitted to continue with operations on condition they run under a “closed loop” system where workers live and work on-site. Businesses have said such arrangements create many difficulties.
Foxconn on Oct. 19 prohibited dining at canteens at the Zhengzhou plant and requested staff to take meals in dormitories. It said production was as usual. The measures prompted people who said they worked at the site to air frustration about their treatment and provisions via social media.
Buy Crypto NowScores broke out of the site over the weekend, with videos and photographs on social media appearing to show Foxconn staff trekking across fields in the daytime and along roads at night. Reuters could not instantly confirm the authenticity of the posts.
Foxconn has not revealed whether any staff at the Zhengzhou site had tested positive for COVID-19. Authorities have since October 19 announced 264 locally transmitted COVID-19 cases in Zhengzhou, the capital of central Henan province.
Foxconn put in place closed-loop measures in March and July 2022 at its smaller Shenzhen factory as cases in the southern city surged.
In May, the Shanghai plant of another Apple supplier, MacBook assembler Quanta Computer Inc (2382.TW), was also affected by employee chaos after the discovery of COVID-19 cases despite a closed-loop system being implemented.
