Apple supplier Foxconn adjusts production to avoid holiday blues

Apple supplier Foxconn adjusts production to avoid holiday blues

Apple supplier Foxconn said Thursday that it expects smartphone revenue to decline this quarter, as it adjusts production to prevent recent COVID-19 restrictions.

Apple supplier Foxconn said Thursday it expects smartphone revenue to decline this quarter, and is adjusting production to prevent recent COVID-19 restrictions at its massive iPhone factory in China from affecting holiday orders.

Foxconn has made headlines in recent weeks, with tight virus Restrictions at its plant in Zhengzhou, the world’s largest iPhone factory, are disrupting production and fueling concerns about the impact of China’s virus policy on global supply chains. The factory, located in the industrial center of China, employs about 200,000 people.

Chairman Liu Yong-wai, in a earnings call, said the Christmas and Lunar New Year holidays are “very important.”

“We will definitely adjust our production capacity and production, so there is no impact on demand in these two holidays,” Liu said. He did not give details.

He added that the cost impact of COVID controls, including providing bonuses for retaining workers, would be short-lived, and Foxconn was working with the government to resume normal production as soon as possible.

On Wednesday, Foxconn said it would continue production in Zhengzhou under a “closed-loop” system, where employees live and work on-site in a bubble cut off from the wider world.

Many employees fled the factory due to strict controls that limited people’s movement and experienced enforced quarantine, with stories circulating of food and medicine shortages. Social media.

If the disruptions persist, it could hamper Foxconn’s ability to ship iPhones in the traditional peak season. Taiwan Technology companies are racing to supply mobile phones and more electronics For the year-end holiday period in western markets followed by the Lunar New Year in East Asia.

When asked if customers are pushing to spread production to other Chinese cities or outside of China, Liu said geopolitics is more likely to play a role in restructuring Foxconn’s production footprint than the pandemic.

“Of course there may be other factors that require reconfiguring production capacity, such as geopolitics,” Liu said.

Outer shadows forecast coverage

The Taiwanese company, officially called Hon Hai Precision Industry Co Ltd, said net profit for the July-September quarter rose 5% to NT$38.8 billion from NT$36.98 billion a year earlier.

Eleven analysts expected an average profit of NT$41.3 billion, according to Refinitiv.

Having said on Monday that it will revise its forecast for the fourth quarter given the situation in Zhengzhou, Foxconn said revenue in the last three months of this year will be flat. It had a relatively conservative view of 2023.

Foxconn said it expects a slight decline in fourth-quarter revenue year-over-year for its smartphone electronics consumers business, which includes smartphones, and a significant growth of cloud and networking products.

It also expects strong fourth-quarter revenue growth in computing products, which includes laptops.

Shares of Foxconn, which has a market capitalization of $43.6 billion, closed 2% lower before the earnings release, trailing a 1% decline in the broader market.

Foxconn’s disappointing earnings come at a time when investors are concerned about slowing technology demand due to rising inflation and mounting global supply chain problems due to China’s COVID policy, with no clear exit strategy in sight.

Apple Inc has also fallen victim to China’s tough policy on COVID, with Foxconn accounting for 70% of iPhone shipments globally, as the California-based company this week lowered its forecast for shipments of premium iPhone 14 models.

Immediate shutdown and business disruption highlighted the risks businesses face Chinaas global companies including Canada Goose Holdings Inc and Estee Lauder Companies Inc closed local stores and lowered expectations.

In some cases, only a handful of cases have led to citywide shutdowns, taking a huge toll on business activity and consumer confidence.

Reuters reported last month that Foxconn’s production of Apple’s iPhones at its Zhengzhou factory could fall by as much as 30% in November due to strict restrictions on the spread of the coronavirus.

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