Coronavirus keeps Apple's Foxconn plants partially shut: report

Many workers in China returned to their jobs on Monday after the government extended the Lunar New Year holiday to slow the spread of the deadly coronavirus. But at two Foxconn plants in China where Apple iPhone parts are manufactured, only about 10% of the workforce reported to work at the start of the week, according to reports.

Key Foxconn plants in Zhengzhou, about 300 miles from the center of the outbreak in Wuhan, and in Shenzhen, near Hong Kong, are back up and running, but only at a fraction of their full production capacity after the Chinese government and public health officials ordered an extended shutdown of the plants. Only about 10% of employees — 16,000 people in Zhengzhou and some 20,000 workers in Shenzhen — have returned to their Foxconn manufacturing jobs, Reuters reported, citing an unnamed source.

The pair of Foxconn factories are responsible for most of Apple's iPhone production. Additionally, more than 40 Apple retail stores across China remain closed over coronavirus fears and aren't expected to reopen until February 15.

Wedbush Securities analyst Dan Ives expects the unforeseen delay to take a direct hit on global shipments of the the tech giant's core iPhone and other products.

"Let's not sugarcoat it: If true (still not confirmed), this production news out of China over the weekend will be a shock to the system and disrupt the supply chain further for Apple on both its core iPhone franchise and AirPods unit production, which is already facing a short supply heading into this week," Ives said in a research note.

Foxconn said in a statement to CBS MoneyWatch that its employees' welfare "is the highest priority, and that it has been "applying all recommended health and hygiene practices to all aspects of our operations." This includes adhering to mandates laid out by various government agencies, which are informing its "post-holiday production schedules."

A spokesperson for the company did not confirm that either plant had reopened or if they are operating at partial capacity.

"As a matter of policy and for reasons of commercial sensitivity, we do not comment on our specific production initiatives," the Foxconn spokesperson told CBS MoneyWatch.

Apple did not reply to CBS MoneyWatch's request for comment.

Ives expects the plant shutdown to wipe out sales of up to 5 million iPhones from the second quarter if the plants' re-openings are delayed for another two to three weeks over coronavirus fears. The production of AirPods, which were already in short supply over the holiday season, "needs to ramp significantly once the factory goes back online to meet increasing global demand," Ives said. 

Tech advisory firm Canalys expects all smartphone shipments in China to decline by 40% to 50% over the two most recent quarters. It expects a 20% drop for PCs if factories are producing at pre-outbreak levels come the end of February.

Apple's stock dropped as much as 1.9% in early trading Monday, wiping out up to $27 billion in market value on reports of Foxconn production delays. It rebounded later in the day, trading slightly higher for the day at around $320 a share.

More than 900 people have died from the coronavirus, all but three in China. There are more than 40,000 confirmed cases; more than 300 cases have been confirmed outside of China, including 12 in the U.S.

In:
• COVID-19
• China
• iPhone

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