As the Covid-19 outbreak worsens in China, iPhone assembler Foxconn is preparing to shift production to other parts of the country. On Monday, city officials bussed workers away from the Zhengzhou plant, where staff are saying that the company has not lived up to expectations in providing adequate food and a safe working environment, which is a big test to the supply chain of Apple.
This unprecedented situation is likely to have a ripple effect on Apple’s financial forecast, as the factory complex in Zhengzhou represents about 60 per cent of Foxconn’s iPhone assembly capacity. According to TF International Securities analyst Ming-chi Kuo, the outbreak could affect “more than 10 per cent of global iPhone production capacity”.
The good news is that Foxconn has backup production capacity at other sites, and Kuo says that the Covid outbreak is not yet denting forecasts for Apple’s iPhone shipments in the current quarter.
“It’s expected that Foxconn’s production capacity will gradually improve within a few weeks, and there should be a limited impact on the 4Q22 iPhone shipments,” he said.
As things are playing out, it looks like Apple’s main iPhone assembler is taking the necessary precautions to ensure that their production doesn’t come to a screeching halt. Only time will tell how great of an impact this will have on the company’s bottom line.