EXCLUSIVE: Apple iPhone production at major China factory could drop 30% amid COVID restrictions

TAIPEI, Oct. 31 (Reuters) – Produced by Apple (AAPL.O) iPhones could fall by as much as 30% at one of the world’s largest factories next month due to the tightening of COVID-19 restrictions in China, a person familiar with the matter said Monday.

Manufacturer Foxconn, Hon Hai Precision Industry Co Ltd Officially (2317.TW)is boosting production at another factory in Shenzhen to make up for the shortfall, said the person, who declined to be identified because the information was private.

Its main factory in Zhengzhou in central China, which employs about 200,000 people, has been shaken by discontent over strict measures to curb the spread of COVID-19, with many workers fleeing the site over the weekend. Read more

The potential impact on production comes amid a traditionally busy time for electronics makers ahead of the year-end holiday season, which is also prime time for sellers like Apple.

Foxconn said on Sunday it would bring the situation under control and coordinate spare production with other plants to minimize any potential impact. Its share price closed down 1.4% on Monday versus up 1.3% in the broader market (.twii). Read more

Apple did not respond to a request for comment.

Analysts at Taipei-based Fubon Research said this month that Foxconn is Apple’s largest iPhone maker, and produces 70% of iPhone shipments globally, which in turn makes up 45% of the Taiwanese company’s revenue.

It also manufactures the device in India, but its factory in Zhengzhou collects the majority of its global production.

Another person familiar with the situation said that many workers remained at the Zhengzhou factory and that production was continuing.

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Strict measures against COVID-19

Under China’s extremely strict policies on the non-spread of the novel coronavirus, localities must act quickly to suppress the outbreak, with measures including widespread lockdowns.

Factories in affected areas are often allowed to remain open provided they operate under a “closed-loop” system where employees live and work on site. The companies said such arrangements present many difficulties.

Foxconn on October 19 banned dining in canteens at the Zhengzhou plant and required workers to eat meals in dormitories. She said production is normal.

The actions led to people who said they worked at the site venting their frustration about their treatment and terms via social media.

Dozens fled the site over the weekend, with photos and videos on social media purporting to show Foxconn employees strolling through fields by day and along roads at night. Reuters could not immediately verify the authenticity of the posts. Read more

Foxconn has not disclosed whether any workers at the Zhengzhou site have been diagnosed with COVID-19. Since October 19, authorities have reported 264 local cases of COVID-19 in Zhengzhou, the capital of central Henan Province.

Foxconn implemented closed-loop measures in March and July of this year at its smaller factory in Shenzhen as cases surged in the southern city.

In May, the Shanghai factory of another Apple supplier, the MacBook Quanta Computer Inc . complex (2382.TW), was also exposed to workers’ chaos after COVID-19 cases were discovered despite the closed-loop system being put in place. Read more

(This story has been paraphrased to correct the headline stating that the figure applies to production at one factory)

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Reporting by Yimou Lee; Additional reporting by Brenda Goh. Editing by Jerry Doyle and Christopher Cushing

Our criteria: Thomson Reuters Trust Principles.

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