As Foxconn halts production in Shenzhen, Apple braces for minimal disruption

As Foxconn halts production in Shenzhen, Apple braces for minimal disruption. (Photo by AFP) / China OUT

As Foxconn halts production in Shenzhen, Apple braces for minimal disruption

  • The southern city of Shenzhen, home to even Chinese tech giants like Tencent and Huawei, imposed a week-long lockdown starting Monday.
  • Taiwan’s Foxconn said the date of factory resumption for the production of Apple products, “is to be advised by the local government.”
  • Foxconn has also “adjusted” its production line to other sites to “minimize the potential impact” from the disruption.

Over the weekend, China reported its gravest outbreak in two years. The nationwide surge in cases has left authorities with little to no choice but to impose lockdowns in several cities. Even Shenzhen, one of the biggest manufacturing hubs for Taiwan’s Foxconn and also home to major tech companies, were imposed with lockdown measures. 

The interruption to daily business, unfortunately, came at a time when the global supply chain is still struggling with an ongoing chip shortage, on top of the disruptions from the war in Ukraine. As of now, the Shenzhen government has instructed public transportation in the city to be halted and all nonessential businesses were ordered to suspend operations from Monday this week through March 20.

Even all industrial parks and residential areas in Shenzhen were instructed to adopt lockdown measures. That also means manufacturing operations for Chinese tech giants like Tencent and Huawei as well as the production line of Foxconn, the biggest supplier of Apple, is halted for a week.

As it is, the crippled global supply chain has been impacting Apple’s business, this week’s lockdown measures will only further put a strain on the iPhone maker who is scheduled to begin selling its line of newly-announced products at the end of this week. According to Nikkei, Shenzhen is Foxconn’s second-largest manufacturing hub in China, after Zhengzhou in Henan Province, which is the world’s biggest iPhone production center. 

In a statement on Monday, the world’s biggest contract electronics manufacturer, said that it would suspend production at its Longhua and Guanlan factories in Shenzhen until further notice from the local government. Foxconn has backup plans to use facilities in other cities to support production.

At this point, Foxconn produces some iPhones, iPads and Macs in Shenzhen. However, almost 50% of iPhones are produced at a factory in Henan province, according to Monday’s research note by Bank of America. Experts reckon that Apple can start to ramp up production in Henan province to recoup some of those losses.

“Apple/Foxconn have the ability to relocate production to other areas in the short term provided that there is not a significantly higher duration of lockdown,” the firm’s analysts wrote. “An increased period of shutdowns can cause ripple effects at other components that can create a shortfall in production.”

To top it off, even Foxconn’s touch panel subsidiary, General Interface Solution (GIS) Holding, said in a stock market filing that its Shenzhen facility will halt production at the start of this week as well. GIS, which counts Apple and Samsung as clients, is also allocating some production to other facilities.

Another key supplier to Apple besides Foxconn and GIS is Taiwan’s biggest printed circuit board maker, Unimicron. Unimicron, a supplier to Nvidia and Intel too, said its subsidiary in Shenzhen was stopping production from Monday. 

Despite that, Bloomberg Intelligence reckons that it may not affect Apple’s smartphone supply chain. “Its main production hub in Zhengzhou hasn’t yet been affected by China’s latest virus resurgence and could help offset lost capacity. Lower seasonal demand may also provide a buffer to catch up on output.”

Meanwhile, the Wall Street Journal has reported that Foxconn is in talks with Saudi Arabia about jointly building a US$ 9 billion multipurpose facility that could make microchips, electric-vehicle components and other electronics like displays.