Apple warns that customers would face longer wait for iPhones with the holiday season approaching, after Covid-19 restrictions in central China “temporarily impacted” production at the world’s largest factory producing the smartphone.
In line with China’s zero-Covid policy, Apple’s principal subcontractor, Foxconn locked down its massive factory in Zhengzhou last month after a spike in infections.
In a statement, Monday, the Taiwanese firm said its fourth-quarter earnings this year would take a hit from the coronavirus lockdown.
Panicking workers last week had fled the site on foot in the wake of allegations of poor conditions at the facility, which employs hundreds of thousands of workers.
“Covid-19 restrictions have temporarily impacted the primary iPhone 14 Pro and iPhone 14 Pro Max assembly facility located in Zhengzhou, China,” California-based Apple said in a statement late Sunday.
“The facility is currently operating at significantly reduced capacity.”
Despite the strong demand for Apple’s products ahead of the holiday season, “we now expect lower iPhone 14 Pro and iPhone 14 Pro Max shipments than we previously anticipated”, it said.
“Customers will experience longer wait times to receive their new products.”
Foxconn is China’s biggest private sector employer, with more than a million people working across the country in about 30 factories and research institutes.
But Zhengzhou is the Taiwanese company’s crown jewel, churning out iPhones in quantities not seen anywhere else.
“In a situation, almost all the iPhone production is happening in Zhengzhou,” Ivan Lam, an analyst with specialist firm Counterpoint, told AFP.
The company was initially “cautiously optimistic” about its fourth-quarter earnings, it said.
“But due to the pandemic affecting some of our operations in Zhengzhou, the company will ‘revise down the outlook for the fourth quarter,” Foxconn explained.
“Foxconn is now working with the government in (a) concerted effort to stamp out the pandemic and resume production to its full capacity as quickly as possible,” the company said.
It did not give any statistical projection for how badly it expected earnings to be hit.
“This is a dark sign of the zero-Covid policy in China impacting production for Apple with Foxconn,” Dan Ives, an analyst at Wedbush Securities, told AFP.
“It confirms the Street’s fears with Apple this quarter and will be an albatross on the tech market this week.”
`We are drowning’
Local authorities locked down the area surrounding the factory on Wednesday, but not before reports emerged of a lack of adequate medical care at the plant.
Multiple workers have recounted scenes of chaos and increasing disorganization at Foxconn’s complex of workshops and dormitories, which form a city-within-a-city near Zhengzhou’s airport.
“People with fevers are not guaranteed to receive medicine,” a 30-year-old Foxconn worker, who asked to remain anonymous, told AFP.
“We are drowning,” he said.
China is the last major economy wedded to a strategy of extinguishing Covid outbreaks as they emerge, imposing snap lockdowns, mass testing, and lengthy quarantines despite the widespread disruption to businesses and international supply chains.
However, authorities poured cold water on speculation that the policy could be relaxed Saturday, with National Health Commission (NHC) spokesperson Mi Feng saying that Beijing would “stick unswervingly to… the overall policy of dynamic zero-Covid”.
“At present, China is still facing the dual threat of imported infections and the spread of domestic outbreaks,” Mi said at a press briefing.
“The disease control situation is as grim and complex as ever,” he said. “We must continue to put people and lives first.”