Hon Hai Group's Foxconn plant assembly line workers
(Picture: Corbis via Getty Images)Apple has suffered a production blow after the firm that assembles its iPhones was forced to shut two factories amid a Covid-19 shutdown in China’s Shenzen.
Foxconn’s two plants in the Chinese city are big makers of iPhones, including the latest 13 model, but have had to halt production amid efforts by officials in China to lockdown the city’s 17.5 million strong population.
Foxconn, whose main Chinese production hub is in the unaffected Zhengzhou, said it had shifted production to other plants to help mitigate any reduction in output, a measure that will last until at least March 20 unless Chinese authorities extend the lockdown.
The current Covid-19 outbreak in China is the worst in the country since the start of the pandemic two years ago, with more than 5,000 locally transmitted case across China over the weekend. Daily cases have doubled to almost ,400 in the last 24 hours.
Shares in Apple fell 2% to $154.7 in pre-market trading on Wall Street in reaction to the news. Analysts at Bank of America stated that Apple has “manageable but significant exposure to Shenzhen”.
It added that Apple and Foxconn can relocate production to other areas in the short term but a longer shutdown “can cause ripple effects in other components that can create a shortfall in production”.
Paul Donovan, UBS Global Wealth Management’s chief economist, said the lockdown would impact non-essential businesses, meaning it was likely that exporters would be particularly hit.
But he did not expect consumers around the globe to witness much of a change.
“International consumers are unlikely to notice,” he said. “Production will shift, and any delay is roughly the difference between free delivery with Amazon Prime and free delivery without Amazon Prime.
“However, markets do seem to be nervous about the effectiveness of the zero-tolerance policy, and the potential for future disruption.”
