Hon Hai Precision Industry Co. reported an 11.4% year-on-year fall in sales in November after some shipments were affected by a Covid outbreak in the Chinese city of Zhengzhou, where the company operates the world’s largest iPhone assembly complex. The company, also known as Foxconn, said November was the hardest-hit period by the pandemic and expects the fourth quarter to be “roughly in line with the market consensus.” The Covid outbreak led to government lockdowns, exodus of workers and violent protests at the manufacturing plant.
The Zhengzhou campus in central China assembles the majority of the world’s iPhone Pro phones, making it crucial to Apple Inc.’s ability to meet demand for the latest generation. Apple has announced shipments will be delayed this year due to disruptions, and analysts have issued a series of increasingly pessimistic forecasts for this year’s shipment disruptions. UBS said this month that the full iPhone 14 generation could fall 16 million units short of previous expectations.
Hon Hai shares fell as much as 2.4% in Taiwanese trading on Tuesday, its biggest intraday decline since October, while Apple shares fell less than 1% in the U.S.
Foxconn assured that the situation was “put under control” and that production will improve by the end of the year.
“In addition to redistributing production capacity from various factories, we have also started hiring new employees and are gradually moving towards restoring normal production capacity,” Foxconn said in the statement.
China is lifting Covid restrictions in some cities, including Zhengzhou, where authorities on Sunday announced the immediate end of mandatory Covid testing for boarding buses, subways, taxis and other public facilities, except for those who do Get out of town or go to karaoke bars and internet cafes. According to a notice published on WeChat, Foxconn is continuing the closed loop, restricting workers’ movements to their dormitories and the factory.
“China’s easing of the Covid-zero policy could help lift Hon Hai’s December sales and pave the way for it to meet or even beat fourth-quarter guidance,” said Bloomberg Intelligence analysts Steven Tseng and Sean Chen in a note Monday.
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