Apple’s Q1 2023 revenue certainly looks set to be hit hard following a disruption in iPhone 14 production, with a Foxconn source saying today that production isn’t expected to return to normal until late December or early January. will come.
The company says the COVID-19 outbreak at its largest factory has now been “brought under control”, but did not provide an official timetable for full production to be restored…
Zhengzhou, popularly known as iPhone City because it’s home to the world’s largest iPhone assembly plant, was shut down two weeks ago — and most of the city reopened late last week.
In an effort to lessen the economic impact of lockdowns, major factories are being allowed to stay open by switching to closed-loop production, with workers staying on campus 24/7 for up to a month at a time, sleeping in shared dormitories. This is of course hard on employees, who are separated from their families and have very limited leisure options.
In the case of Foxconn’s factory, things got much worse when there was an outbreak of COVID-19 on campus itself. Workers complained about a lack of food and medicine. Significant numbers chose to escape the factory and return to their hometowns. Subsequent bonus offers had limited effect and failure to pay them led to violent protests. Attempts to appease workers with compensation caused more than 20,000 workers to leave.
Even after Zhengzhou’s lockdown ended, Foxconn continued closed-loop production, likely in an effort to contain the COVID-19 infection within the campus until everyone tested negative.
iPhone production will be low for another month
Reuters reports that Foxconn has stated that the COVID-19 outbreak is now under control and is working to ramp up iPhone output.
“At present, the overall epidemic situation has been brought under control, with November being the worst affected period,” the company said in a statement, adding that it has started recruiting new employees and gradually “returning production capacity to normal”. “.
While the company is vague about the timing, a Foxconn source says it will take at least another month to get back on track.
Foxconn expects China’s COVID-hit Zhengzhou factory to resume full production around late December to early January, a Foxconn source said Monday, after worker unrest disrupted the world’s largest iPhone factory last month.
Apple’s Q1 2023 revenue certainly seems to be hit hard
Foxconn has been equally vague about the size of the production shortfall, and Apple also declined to comment on numbers. That has left us with analyst estimates of the size of lost production, which ranged from about 6 million units to more than 20 million units.
However, three things are known:
That makes it pretty certain that Apple’s earnings for the holiday quarter — the company’s fiscal first quarter — will be hit hard.
Long-term effect unclear
The impact in the first quarter of 2023 is less certain. The most pessimistic view is that four factors could ensure that the lost sales in the holiday quarter disappear completely. Personally, I am very skeptical of that idea. Some sales will of course be lost permanently, but I doubt it will amount to anything like a majority.
But even if I’m right, there will be a lot of missed ground to make up for. Foxconn will not only have to return to its originally planned production volumes, but also significantly exceed them to make up for the shortfall. How long it will take to do that is still completely unknown.
Also uncertain is how long China will maintain its COVID Zero policy – placing entire cities in strict lockdown after only a handful of positive tests – despite the growing unrest. Protests are taking place across the country, with signs of a growing pro-democracy movement.
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