(Bloomberg) — Apple Inc. supplier Foxconn is halting operations at its Shenzhen sites, one of which produces iPhones, in response to a government-imposed lockdown on the tech hub.
The Taiwanese company, also known as Hon Hai Precision Industry Co., has its China headquarters in the area and a key manufacturing site in Guanlan. It is suspending operations at the two campuses and has reallocated production to other sites to reduce impact from the disruption, the company said in a statement. Foxconn didn’t specify the length of the suspension. The measures from the Chinese government call for non-essential businesses in Shenzhen to halt until March 20.
While the shutdown may affect production of many of the devices Foxconn makes for Apple and other brands, demand for electronics typically troughs in the first quarter of every year after the holiday-season peak.
Hon Hai, the primary assembler for iPhones, closed 1% lower on Monday in Taipei. It expects no “major” impact for now to its finances and business from the temporary shutdown, the company said in a stock exchange filing late Monday.
Read more: China Locks Down Shenzhen, Entire Jilin Province as Covid Swells
What Bloomberg Intelligence Says
Hon Hai’s suspension of iPhone production in Shenzhen due to Covid-19 lockdowns 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. Hon Hai assembled 70% of the world’s iPhones in 4Q, IDC data shows.
– Charles Shum, analyst
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China reported more than 3,300 Covid-19 infections on Saturday, as the country faces its worst outbreak since the early days of the pandemic and officials step up lockdowns to stem the spread.
Foxconn produces the majority of its iPhones at a plant in the central Chinese city of Zhengzhou, which has earned it the nickname of iPhone City. Its Guanlan site is smaller in scale. The company was among the first to confront disruptions from the coronavirus outbreak two years ago when it asked staff to keep away from its Shenzhen headquarters as a precautionary measure.
China placed the 17.5 million residents of Shenzhen into lockdown for at least a week on Sunday, seeking to halt a growing Covid-19 outbreak. The lockdown, which came after virus cases doubled nationwide to nearly 3,400, will be accompanied by three rounds of citywide mass testing, according to a government notice. The move followed earlier restrictions placed on Shenzhen’s central business district.
All bus and subway systems have been shut, and businesses, except those providing essential services, have been closed. Shenzhen is home to the headquarters of giants Huawei Technologies Co., SZ DJI Technology Co. and Tencent Holdings Ltd. as well as one of China’s busiest ports.
(Updates with Hon Hai’s filing from the fourth paragraph)
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