Demand for high-end smartphones assembled at Foxconn’s ( 2317.TW ) factory in Zhengzhou has helped Apple remain a bright spot in a technology sector hit by cuts in consumer spending amid rising inflation and interest rates. However, the Cupertino, California-based retailer has fallen victim to China’s zero-tolerance COVID-19 policy, which has seen global companies including Canada Goose Holdings Inc ( GOOS.TO ) and Estee Lauder Companies Inc ( EL. N) to close the local stores and cut the provisions. “The facility is currently operating at significantly reduced capacity,” Apple said on Sunday without specifying the size of the reduction. “We continue to see strong demand for the iPhone 14 Pro and iPhone 14 Pro Max models. However, we now expect lower iPhone 14 Pro and iPhone 14 Pro Max shipments than we previously expected,” it said in a statement. Reuters last month reported that iPhone production could drop by as much as 30% in November at Foxconn’s Zhengzhou factory – one of the world’s largest – due to the COVID-19 restrictions. The factory in central China, which employs about 200,000 people, has been rocked by discontent over strict measures to contain the spread of COVID-19, with many workers walking off the site. Market researcher TrendForce last week cut its forecast for October-December iPhone shipments by 2 million to 3 million units from 80 million due to the factory problems, adding that its research found capacity utilization rates of around 70% . Apple, which started selling the iPhone 14 series in September, said customers should expect longer wait times. “Anything that affects Apple’s production obviously affects its stock price,” said Quincy Krosby, chief global strategist at LPL Financial in Charlotte, North Carolina. “But this is part of a much deeper story – the uncertainty surrounding the future of the Chinese economy… These headlines are part of the ongoing story about whether there is any truth to persistent rumors that authorities are debating whether some of the measures will be lifted in the first quarter”. China on Monday reported its highest number of new COVID-19 cases in six months, with the disruption in the world’s second-largest economy spreading nationwide since October. Over the weekend, health officials said they would maintain strict coronavirus restrictions, disappointing investors hoping for an easing. Meanwhile, Apple expects to produce at least 3 million fewer iPhone 14 devices this year than planned due to weak demand for lower-end models, Bloomberg News reported on Monday, citing people familiar with the plan. The world’s most valuable company, with a market capitalization of $2.2 trillion, forecast last month that October-December revenue growth would slow from 8% in the previous quarter – although market watchers took that as a boon in an industry that he had suffered. “Given that Apple reported positive guidance just two weeks ago, we believe this points to the potential for a longer and tighter lockdown,” Credit Suisse analysts said, expecting iPhone sales to be pushed into later quarters than expected. get lost. They estimated Apple’s revenue to rise 3% in the current quarter, with iPhone sales rising 2% to $73 billion. Reuters Graphics
FOXCONN CUT OUT prospects
Taiwan’s Foxconn is the world’s largest electronics contract manufacturer and Apple’s largest iPhone maker, accounting for 70% of global shipments. It has iPhone manufacturing facilities in India and southern China, but the largest is in Zhengzhou city in eastern China’s Henan province. Local officials have commented on recent cases of COVID-19 at the plant. Foxconn declined to disclose the number of infections or comment on the condition of those infected. On Monday, he said he was working to resume full production in Zhengzhou as soon as possible. A person familiar with the matter told Reuters that Foxconn’s target is by the second half of November. At the request of the local government, Foxconn said it would implement measures to limit the spread of COVID-19, including limiting workers’ movement between the dormitory and the factory area. The manufacturer also launched a recruitment drive, offering workers who left the factory between Oct. 10 and Nov. 5 a one-time bonus of 500 yuan ($69) if they returned. It also advertised wages of 30 yuan an hour, higher than the basic wages of 17 to 23 yuan some Reuters workers received. The Economic Zone of Zhengzhou Airport, which houses the iPhone factory, went into a seven-day lockdown on Wednesday with measures that included banning residents from going out and only allowing access to authorized vehicles. read more Foxconn said the provincial government “has made it clear that, as always, it will fully support Foxconn.” “Foxconn is now working with the government in a concerted effort to eradicate the pandemic and resume production to the maximum extent possible.” Having previously expressed “cautiously optimistic” fourth-quarter earnings guidance, Foxconn said on Monday it would “revise downwards” its outlook given the events in Zhengzhou. The fourth quarter is traditionally a hot time for Taiwanese technology companies as they scramble to supply smartphones, tablets and other electronics for the year-end holiday shopping season in Western markets. Foxconn releases its third quarter earnings results on November 10. The company, formally Hon Hai Precision Industry Co Ltd, saw its share price fall 0.5% in Monday trading, against a 1.5% rise in the benchmark index (.TWII). ($1 = 7.2135 Chinese Yuan Renminbi) Reporting by Ben Blanchard and Sarah Wu in Taipei, Caroline Valetkevitch in New York and Jaiveer Shekhawat in Bengaluru. Additional reporting by Brenda Goh. Written by Miyoung Kim. Editing: Daniel Wallis and Christopher Cushing Our Standards: The Thomson Reuters Trust Principles.
