Covid chaos at Foxconn iPhone plant causes 29% revenue fall

Revenues at Foxconn, Apple’s biggest manufacturing partner, fell sharply in November during a crucial pre-holiday period, in the latest signal of the damaging impact of its chaotic handling of a Covid-19 outbreak at the world’s largest iPhone plant.

Foxconn reported NT$551bn (US$18bn) in revenue last month, down 29 per cent from October and 11 per cent from a year earlier. It is the first time in 12 years that the company has announced a month-on-month fall in November, a time of high production to meet Christmas sales.

The company did not mention the iPhone, but said the drop in smart consumer electronics products — which includes smartphones — was because of “a portion of shipments being impacted by the epidemic in Zhengzhou”, where a coronavirus outbreak in Foxconn’s largest plant has led to weeks of disruption and a revolt by workers.

“At present, the overall epidemic situation has been brought under control, with November being the most affected period,” Foxconn said. “In addition to reallocating production capacity of different factories, we have also started to recruit new employees, and are gradually moving towards the direction of restoring production capacity to normal.”

One person close to the company said Foxconn’s internal goal was to return to “completely normal operations” after the new year at the factory in the Chinese city of Zhengzhou. It has been rocked by two waves of staff walkouts and violent unrest in recent weeks. Foxconn declined to comment on the target.

The disruption of operations at the plant, which was until recently the only factory to assemble the iPhone 14 Pro and Pro Max, the newest premium models, triggered a rare warning from Apple last month that shipments would be affected.

The fallout from the plant disruption drove down the iPhone’s market share in China to 20.1 per cent last week, compared with 27.5 per cent during the same calendar week last year, according to analysts at investment bank Jefferies.

They estimate iPhone sales to consumers were down 46 per cent annually and 35 per cent sequentially in China last week.

“That is the third week of sequential decline in sell-through and deterioration in the [year-on-year] fall. We believe the deterioration is mainly driven by supply constraints, as Foxconn’s facility in Zhengzhou has been impacted by Covid outbreak,” the analysts wrote.

November is the tail-end of the pre-holiday high season for smartphone assembly. The company’s guidance that this was the month when operations were worst affected by the plant disruption was therefore “not all that meaningful”, said the person close to the company. “The pressure is gradually easing now, also because we are moving into the season where we need fewer people.”