The city of Zhengzhou in central China, home to the world’s largest iPhone factory, raised a five-day Covid lockdown, in a move analysts called a much-needed relief for Apple and its main supplier Foxconn.
Zhengzhou is the site of “iPhone City”, a sprawling manufacturing campus owned by Taiwanese contractor Foxconn that is normally home to around 200,000 workers who make products for Apple.
(AAPL), including the iPhone 14 Pro and 14 Pro Max. Last Friday, the city Locked its urban neighborhoods for five days as Covid-19 cases surged there.
Local authorities also lifted lockdown measures in four districts of Guangzhou on Wednesday, Guangzhou Health Commission spokesperson Zhang Yi said at a press briefing. The easing of restrictions imposed earlier this month in the manufacturing and transportation hub came after residents clashed with police on Tuesday. Videos circulating on social networks showing residents shouting “lift the confinement”.
Guangzhou will stop sending all close contacts of Covid-19 patients to central quarantine facilities and allow some to self-isolate at home, Zhang said. The city will also no longer initiate mass Covid-19 testing across the district. “All districts should conduct tests scientifically,” Zhang added.
The massive Foxconn facility is not part of Zhengzhou’s urban districts. However, analysts say the lockdown would have hurt efforts to restore lost production on campus, the site of a violent workers’ revolt Last week.
“This is good news in a grim storm for Cupertino,” Daniel Ives, managing director of equity research at Wedbush Securities, told CNN Business, referring to the California city where Apple is based. “There’s a lot of heavy work for Apple to get the factories going again.”
Ives estimates that ongoing supply disruptions at Foxconn’s Zhengzhou campus were costing Apple about $1 billion a week in lost iPhone sales. The unrest began in October when workers left the campus in Zhengzhou, the capital of central Henan province, due to Covid fears. Short-staffed, bonuses were offered to workers to return.
But protests erupted last week when newly hired staff said management had reneged on promises. The workers, who clashed with security guards, were eventually offered money to quit and leave.
Analysts said Foxconn’s production issues will accelerate the pace of supply chain diversification from China to countries like India.
Ming-Chi Kuo, analyst at TF International Securities, writing on social media that he estimated that iPhone shipments could be 20% lower than forecast in the current October-December quarter. The Zhengzhou plant’s average capacity utilization rate was only about 20% in November, he said, and is expected to improve to 30% to 40% in December.
Total iPhone 14 Pro and 14 Pro Max shipments in the current quarter would be 15 to 20 million units lower than expected, according to Kuo. Due to the high price of the iPhone 14 Pro series, Apple’s overall iPhone revenue in the current holiday quarter could be 20 to 30 percent lower than investors’ expectations, he added.
— Laura He and Wayne Chang in Hong Kong, and Xiaofei Xu in Paris, contributed to this article.