Covid Surge Tempers Hopes ‘iPhone City’ Lockdown Will Lift Soon

(Bloomberg) — Covid cases have more than doubled in the central Chinese city of Zhengzhou, dampening hopes that authorities will lift a lockdown of the area surrounding the world’s largest iPhone factory.

A seven-day lockdown of the Airport Economy Zone, which houses Apple Inc.’s global iPhone production base, expires noon Wednesday. The local government may extend those curbs — which curtail the flow of everything but essential goods and personnel — depending on the progress of a local outbreak. Covid cases across the city jumped to 733 as of Monday from 297 the previous day.

An extension would deal a blow to Apple and its most important supplier Foxconn Technology Group, which makes an estimated four out of five of the world’s latest iPhones from the complex in Zhengzhou dubbed “iPhone City.” Even before the seven-day prohibition, Foxconn had struggled to stem an exodus of workers fleeing a local outbreak and subsequent quarantine.

The disruption coincides with the US holiday shopping season as well as a sharp slowdown in demand for electronics worldwide. Apple warned Sunday it would ship fewer premium devices than anticipated because of the Zhengzhou lockdown.

The US company, which is grappling with tepid demand for less expensive iPhone 14s, expects to produce at least 3 million fewer iPhone 14 handsets than originally anticipated this year. The company and its suppliers now aim to make 87 million devices or fewer, compared with a target of 90 million units earlier, Bloomberg News reported this week.

Even if the lockdown lifts Wednesday, it may take weeks for Foxconn to recruit and train the hundreds of workers that have left. The Taiwanese company, which typically employs around 200,000 at the site, is offering generous compensation to try and entice and retain staff.

Hon Hai Precision Industry Co, Foxconn’s main listed arm, is slated to report earnings Thursday after lowering its fourth-quarter outlook to take the lockdown into account. The company, which last month went into a “closed loop” that cut off contact with much of the outside world, has said it’s working with the local government to get its plant back on track.

Should Foxconn get the Covid situation under control, sales will still take a hit in the first half of November before starting to recover in subsequent weeks, analysts at Citi wrote Nov. 6. Morgan Stanley analysts, describing a hypothetical worst-case scenario, estimated Foxconn could swallow a 20% hit to sales for the current quarter if Zhengzhou shipments were to grind to a halt over the remainder of 2022.

(Bloomberg) — Covid cases have more than doubled in the central Chinese city of Zhengzhou, dampening hopes that authorities will lift a lockdown of the area surrounding the world’s largest iPhone factory.

A seven-day lockdown of the Airport Economy Zone, which houses Apple Inc.’s global iPhone production base, expires noon Wednesday. The local government may extend those curbs — which curtail the flow of everything but essential goods and personnel — depending on the progress of a local outbreak. Covid cases across the city jumped to 733 as of Monday from 297 the previous day.

An extension would deal a blow to Apple and its most important supplier Foxconn Technology Group, which makes an estimated four out of five of the world’s latest iPhones from the complex in Zhengzhou dubbed “iPhone City.” Even before the seven-day prohibition, Foxconn had struggled to stem an exodus of workers fleeing a local outbreak and subsequent quarantine.

The disruption coincides with the US holiday shopping season as well as a sharp slowdown in demand for electronics worldwide. Apple warned Sunday it would ship fewer premium devices than anticipated because of the Zhengzhou lockdown.

The US company, which is grappling with tepid demand for less expensive iPhone 14s, expects to produce at least 3 million fewer iPhone 14 handsets than originally anticipated this year. The company and its suppliers now aim to make 87 million devices or fewer, compared with a target of 90 million units earlier, Bloomberg News reported this week.

Even if the lockdown lifts Wednesday, it may take weeks for Foxconn to recruit and train the hundreds of workers that have left. The Taiwanese company, which typically employs around 200,000 at the site, is offering generous compensation to try and entice and retain staff.

Hon Hai Precision Industry Co, Foxconn’s main listed arm, is slated to report earnings Thursday after lowering its fourth-quarter outlook to take the lockdown into account. The company, which last month went into a “closed loop” that cut off contact with much of the outside world, has said it’s working with the local government to get its plant back on track.

Should Foxconn get the Covid situation under control, sales will still take a hit in the first half of November before starting to recover in subsequent weeks, analysts at Citi wrote Nov. 6. Morgan Stanley analysts, describing a hypothetical worst-case scenario, estimated Foxconn could swallow a 20% hit to sales for the current quarter if Zhengzhou shipments were to grind to a halt over the remainder of 2022.