“The Impact Would Be Big” – Fears Rise Over iPhone Output As China Shutdown Continues

“The Impact Would Be Big” – Fears Rise Over iPhone Output As China Shutdown Continues

A new report from Reuters details how Foxconn could soon realize a massive production hit and shipment plunge to specific customers, including Apple if factory shutdowns in China persist due to the coronavirus outbreak

A source told Reuters with direct knowledge of the matter that Foxconn, which makes Apple smartphones, has halted “almost all” of its production in China until Feb. 10. The source added that delays after Feb. 10 could dramatically impact Apple’s iPhone shipments abroad. 

The source told Reuters that Foxconn had experienced a “fairly small impact” from the outbreak as it immediately shifted production lines to Vietnam, India, and Mexico. 

The source also noted that if Foxconn facilities work overtime, they might be able to make up lost production, but there’s no certainty if that could happen.

Last Monday, we were one of the first to note that Suzhou, one of the largest manufacturing hubs in China, told millions of workers not to return until Feb. 9.

The source said any delays in Foxconn factories after Feb. 10 could disrupt iPhone shipments. 

“What we are worried about is delays for another week or even another month. The impact would be big,” the source said. “It definitely will have an impact on the Apple production line.”

There’s a significant concern that iPhone production in Guangdong and Zhengzhou could see extended delays.

“The tricky question is whether we will be able to resume production (on Feb. 10) … It’s up to the instructions given by central and provincial governments.”

Foxconn asked employees in China’s Hubei, the epicenter of the outbreak, not to return to factories, according to an internal memo, first viewed Reuters. 

Morningstar analyst Don Yew said there should be a limited impact on Foxconn’s supply chain if factories are closed down in Wuhan for an extended period.

The big concern he said, is that if the smartphone manufacturing hub in Guangdong is shut down for an extended period, it would then start disrupting Apple iPhone shipments. 

Will it be a supply chain shock in China that reminds everyone how far Apple shares are priced from fundamentals? 

Bloomberg macro strategist Mark Cudmore suggested last week that the outbreak in China could be a ‘black swan’ event exposing the fragilities, and vulnerability, of financial markets that long ago de-tethered from any fundamental underpinning.

This could end very badly… 

Tyler Durden

Tue, 02/04/2020 – 02:45

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Author: Tyler Durden

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