On Tuesday, Foxconn, Apple’s iPhone assembler, said it expects to resume normal manufacturing operations by the end of the month. The Taiwanese corporation, which maintains 75 percent of its production capacity in China, has experienced production stoppages and delays because of the coronavirus outbreak. Analysts believe the COVID-19 epidemic will continue to have a significant negative impact on the firm’s financial outlook as well as that of its partner Apple.
Coronavirus’ Impact on Foxconn
Like many corporations that maintain a large portion of their supply chain in China, Foxconn’s operations have been disrupted by the coronavirus outbreak. The Chinese government ordered a temporary suspension of manufacturing to halt the disease’s spread during the Lunar New Year. Subsequently, anxiety regarding COVID-19 has caused delays in staffers returning to work, device deliveries, and consumer spending.
Indeed, Foxconn reported its factories are currently at 50 percent of their seasonal capacity.
The manufacturer expects its production levels to improve throughout March as more workers return. Moreover, the corporation has begun offering signing bonuses to increase the headcount in its Chinese facilities.
Still, the company has already made a downward revision on its revenue outlook. In January, Foxconn forecast an annual growth rate of 3 to 5 percent. But last month, Chairman Young Liu offered new guidance of a 1 to 3 percent growth rate. The executive also predicted “significant, negative year-on-year impact for all our core business segments” in the current quarter.
KGI Asia analyst Laura Chen stated Foxconn would experience an annual decline of 10 percent in Q1 2020. The market expert forecast the firm will report an 8 percent year-over-year shortfall in the second quarter.
Foxconn Slow Down Impact on Apple
Although Foxconn produces electronic devices for Dell, Microsoft, and Sony, its production slowdown might have the biggest impact on Apple.
Before the coronavirus outbreak began disrupting China’s manufacturing sector, the Big Tech firm intended to release a new budget iPhone in March. However, due to Foxconn’s production slowdown, the Taiwanese company likely missed the production schedule for the new mobile device.
At present, neither Foxconn nor Apple has commented on the release of the new handset. However, Chen predicted the launch of the successor to the iPhone SE would be rescheduled due to production capacity issues. Indeed, the Taiwanese company had to forestall the reopening of its Zhengzhou iPhone plant in light of the COVID-19 outbreak.
In addition, Apple suppliers Quanta Computer, LG Display, and Inventec are still working to restore their full Sino production capacity.
Furthermore, the Silicon Valley giant will also take a coronavirus related financial hit in its Chinese device sales. Strategy Analytics predicts Apple will experience a 32 percent decline in Sino handset sales in Q1 due to logistics problems and store closures. Similarly, research firm Canalys forecasts the iPhone maker will be down 42.5 million units shipped year-over-year.
It’s worth noting that Apple might be able to recover some of its Chinese losses in another market. Last week, The Burn-In reported the corporation would begin selling its products directly in India online this year for the first time. As the firm enjoyed a 200 percent sales increase in the region in 2019, it might be able to soften the impact of the coronavirus provided its production capacity is fully restored in a timely fashion.