Coronavirus May Halt Foxconn’s iPhone Production
Foxconn could see a ‘big’ production impact with shipments to customers including Apple facing disruption if a Chinese factory halt due to the coronavirus outbreak continues into a second week, according to an anonymous person.
Foxconn, a manufacturing powerhouse that makes smartphones for Apple and other brands, has almost entirely stopped all of its production in China after companies were told to shut until 10 February – at least.
The Taipei-based contract manufacturer, which is the world’s largest, has not provided a comment, with Apple declining to provide one.
The anonymous source said on Monday that Foxconn has so far seen a ‘fairly small impact’ from the coronavirus outbreak as it was utilising factories in less affected countries including India, Vietnam and Mexico to try and prevent shortages from the closures.
In Eastern China’s Suzhou, one of the countries largest manufacturing areas, companies have been advised to stay shut until February at least and 9 February for Shanghai.
Factories in the southern manufacturing district of Dongguan and in the export-oriented Guangdong province have also been told not to resume operations until after 10 February.
The outbreak of coronavirus, which the World Health Organisation (WHO) declared a global health emergency, has threatened to disrupt a large proportion of Chinese manufacturing.
The source also said a halt in operations beyond 10 could disrupt Foxconn’s shipments, emphasising concerns about production in the southern province of Guangdong and the city of Zhengzhou in Henan province where key iPhone plants reside.
‘What we are worried about is delays for another week or even another month. The impact would be big,’ the source told Routers.
‘It definitely will have an impact on the Apple production line.’
‘The tricky question is whether we will be able to resume production (on February 10) … It’s up to the instructions given by central and provincial governments.’
Foxconn has told employees and clients in China’s Hubei, the epicentre of the coronavirus outbreak, not to return to factories for work and instead advised workers to report their health condition to managers on a daily basis, a leaked internal memo reveals.
The company also reported employees who follow their instructions will be paid as usual and for those who fail to do so will be ‘severely’ punished – but it did not elaborate how.
Additionally, a hotline was organised to encourage employees to report those who had broken the rules, with a monetary award of 200 yuan ($43), the note dated 1 February stated.
Don Yew, Morningstar analyst, sees ‘limited’ impact on Foxconn’s supply chain, claiming its four subsidiaries in Hubei only accounted for 1.8 per cent of the firm’s overall revenue in 2018. Yew also said vendors like Apple maintain a diversified supply chain that would protect them from harsh impact on production.
However, Yew also said a spread of the coronavirus to major smartphone manufacturing areas such as Guangdong may lead companies to revise financial estimates for companies, including Foxconn.