Apple’s main iPhone assembler Foxconn has once again been hit with a COVID-19 outbreak. The company was planning to seasonally reduce iPhone production, however, it has now delayed the plan to deal with closed-loop production protocols.
Foxconn delays plan to slow down iPhone production due to COVID-19 outbreak
In a statement to a major publication on Thursday, Foxconn confirmed that a “small number of employees” had been asked to quarantine. It did not provide further details but said that its attempts to deal with the outbreak are “progressing steadily” and that quarantined employees are being provided with “material supplies, psychological comfort and responsive feedback.”
As for iPhone production, TF Securities analyst Ming-Chi Kuo in a tweet revealed that Foxconn initially planned to gradually reduce iPhone production capacity from November to December to cope with the seasonality. However, Now that its iPhone plants in Zhengzhou have entered closed-loop production, its plans to reduce iPhone production capacity have been postponed.
More than 10% of global iPhone production capacity is currently affected as Foxconn’s Zhengzhou iPhone plants suddenly entered closed-loop production without warning.
Kuo does say that this will not significantly impact the current iPhone supply chain shipment forecast.
This incident has not changed the current iPhone supply chain shipment forecast. 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.
Apple is also in talks with other iPhone assemblers Pegatron and Luxshare ICT to switch production lines of the iPhone 14 and iPhone 14 Plus to the iPhone 14 Pro and Pro Max to keep up with demand for the higher-end models. At the earliest, Luxshare ICT will start shipping units of the iPhone 14 Pro by the first quarter of 2023.
Apple is discussing with Pegatron and Luxshare ICT to switch iPhone 14/14+ production lines to 14 Pro/14 Pro Max. Luxshare ICT will likely start shipping the iPhone 14 Pro in early 1Q23 at the earliest.
The analyst concludes by saying that although the incident will have a “limited impact on 4Q12 iPhone shipments,” however, “suppliers in China must learn to improve closed-loop production efficiency in response to the zero-Covid policy,” to avoid higher costs.
