It seems certain that Apple’s Q1 2023 revenue will be severely affected after the iPhone 14 production was disrupted, as a source from Foxconn said today that production is not expected to return to normal levels until late December or early January.
The company says the COVID-19 outbreak inside its largest plant is now “under control,” but has not provided any official timeline for restoring full production…
Zhengzhou, colloquially known as iPhone City thanks to being home to the world’s largest iPhone assembly plant, was put into lockdown two weeks ago — with most of the city reopening late last week.
In an effort to limit the economic impact of the lockdowns, large factories are allowed to stay open by switching to closed-loop production, in which workers stay on campus 24/7 for up to a month at a time, sleeping in shared dormitories. This is obviously difficult for workers who are separated from their families and have very limited leisure opportunities.
In the case of the Foxconn plant, things got a lot worse when there was an outbreak of COVID-19 within the campus itself. Workers complained of a lack of food and medicine. Large numbers opted out of the factory and returned to their home towns. Subsequent bonus offers had limited impact, and their non-payment led to violent protests. Attempts to appease the workers with compensation resulted in the departure of more than 20,000 workers.
Even after Zhengzhou’s lockdown ended, Foxconn continued closed-loop production, likely in an effort to contain COVID-19 infections on campus until everyone tested negative.
iPhone production will be down for another month
Reuters reports that Foxconn has stated that the COVID-19 outbreak is now under control, and that it is working to ramp up iPhone production.
“Currently, the general epidemic situation has been brought under control, with November being the hardest-hit period,” the company said in a statement, adding that it has started hiring new employees and “gradually restoring 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 its coronavirus-hit factory in Zhengzhou, China, to resume full production in late December to early January, after worker unrest last month disrupted the world’s largest iPhone factory, a Foxconn source said on Monday. .
It seems certain that Apple’s Q1 2023 revenue will be hit hard
Foxconn has been equally vague about the extent of the production shortfall, and Apple also declined to comment on numbers. That left us with analyst estimates for just how much production was lost, which ranged from about 6 million units to more than 20 million units.
However, three things are known:
This makes it seem pretty certain that Apple’s revenue for the holiday quarter — the company’s first fiscal quarter — will be hit hard.
The long-term effect is not clear
Less certain is the impact in the first quarter of 2023. The most pessimistic view is that four factors could cause the lost quarter of sales to disappear completely. Personally, I am very skeptical about this idea. some Of course it will lose sales permanently, but I doubt it will amount to anything like the majority of them.
Even if you were right, there would be a lot of lost ground to make up for. Foxconn will not only have to return to its original planned production volumes, but significantly exceed them to make up for the shortfall. How long it will take to do this is not yet fully known.
It is also uncertain how long China will continue its COVID Zero policy – which sees entire cities in strict lockdown after a handful of positive tests – in the face of mounting unrest. Protests broke out across the country, with signs of a growing pro-democracy movement.
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