LDN - Business

Foxconn sees COVID-hit China plant back at full output in late Dec-early Jan -source

[December 05, 2022] By Yimou Lee

TAIPEI (Reuters) - Apple supplier Foxconn expects its COVID-hit Zhengzhou plant in China to resume full production around late December to early January, a Foxconn source said on Monday, after worker unrest last month disrupted the world's biggest iPhone factory.

The world's largest contract electronics maker later on Monday said revenue in November fell 11.4% year on year reflecting production problems related to COVID-19 controls at the major iPhone factory.

"At present, the overall epidemic situation has been brought under control with November being the most affected period," the company said in a statement, adding it has started to recruit new employees and was gradually "restoring production capacity to normal".

Foxconn said November revenue for its smart consumer electronics business, which includes smartphones, declined year on year partly due to a portion of shipments being impacted by production disruptions in Zhengzhou. It did not elaborate.

The Zhengzhou plant has been grappling with strict COVID-19 restrictions that have fuelled discontent among workers over conditions at the factory. Production of the Apple device was disrupted ahead of Christmas and January's Lunar New Year holidays, with many workers either having to isolate to combat the spread of the virus or fleeing the plant.

Following the November unrest, that saw workers clash with security personnel, Foxconn could have seen more than 30% of the Zhengzhou site's November production affected, Reuters reported last month citing a source familiar with the matter. Foxconn hasn't disclosed details of the impact of the disruption on its production plans or finances.

Analysts say Foxconn assembles around 70% of iPhones, and the Zhengzhou plant produces the majority of its premium models including iPhone 14 Pro.

"The capacity is now being gradually resumed" with new staff hiring under way, said the person with direct knowledge of the matter. The person declined to the named as the information was private.

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The logo of Foxconn is pictured on top of a company's building in Taipei, Taiwan October 31, 2022. REUTERS/Carlos Garcia Rawlins/File Photo

"If the recruitment goes smoothly, it could take around three to four weeks to resume full production," the person said, pointing to a period around late December to early January.

Foxconn and the local government are working hard on the recruitment drive but many uncertainties remain, according to the source. The person cited "fears" some workers might have about working for the company after the plant was hit by protests last month that sometimes turned violent.

"We are firing on all cylinders on the recruitment," the person said.

Foxconn declined to comment.

A second Foxconn source familiar with the matter said the company is hoping to resume full production "as soon as possible" but was not able to give a timeline.

"The situation has stabilised," the person said, referring to the protests and the government's easing of COVID restrictions. "The local government is actively helping with the resumption."

The Taiwanese company said last month it expects a slight decline in fourth-quarter revenues year-on-year for its smart consumer electronics business and significant growth for cloud and network products.

Foxconn said on Monday its overall revenue in the fourth quarter was expected to be "roughly in line with market consensus", without elaborating. It did not offer a fresh outlook for its various business sectors.

The company said last month that revenue in the final three months of this year would be flattish, and that it has a relatively conservative outlook for 2023.

Foxconn shares closed flat, in line with the broader market which ended up 0.1%.

(Reporting by Yimou Lee and Ben Blanchard; editing by Kenneth Maxwell and Jason Neely)

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