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


Hong Kong
CNN Business

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

Zhengzhou is the site of “iPhone City,” a sprawling manufacturing campus owned by Taiwanese contract manufacturer Foxconn that is home to about 200,000 workers who make products for Apple (AAPL), including the iPhone 14 Pro and 14 Pro Max. Last Friday, the city locked down its urban areas for five days as Covid-19 cases increased there.

Foxconn’s massive facility is not part of the city’s urban areas. However, analysts say the lockout would be detrimental to efforts to restore lost production on the campus, the site of a violent worker uprising last week.

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“This is 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. “There’s a lot of heavy construction ahead of us for Apple to be able to bring the factories back.”

Ives estimates that ongoing supply outages at Foxconn’s Zhengzhou campus were costing Apple about $1 billion a week in lost iPhone sales. The troubles began in October when workers left the campus in Zhengzhou, the capital of central Henan province, over fears of Covid. Staff were cut, workers were offered bonuses to return.

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But protests broke out last week when newly hired staff said management had reneged on their promises. In the end the workers, who clashed with security officers, were offered cash to quit and leave.

Analysts said Foxconn’s production woes will accelerate the diversification of the supply chain from China to countries such as India.

Ming-Chi Kuo, an analyst at IT International Securities, wrote on social media that he estimated iPhone shipments could be 20% lower than expected in the current quarter from October to December. The average capacity utilization rate of the Zhengzhou plant was only about 20% in November, he said, and was expected to improve to 30% to 40% in December.

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The total iPhone 14 Pro and 14 Pro Max shipments in the current quarter would be 15 million to 20 million units less than previously estimated, according to Kuo. Because of the high price of the iPhone 14 Pro series, Apple’s overall iPhone revenue in the current holiday quarter could be 20% to 30% lower than investors’ expectations, he said.

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