iPhone SOS! Foxconn Seen Risking 20% Sales Drop in Worst-Case Covid Shutout | Tech News

iPhone SOS! Foxconn Seen Risking 20% Sales Drop in Worst-Case Covid Shutout

Morgan Stanley analysts have put a value on how much revenue is at risk for Foxconn Technology Group if its Zhengzhou operation is unable to ship any iPhones.

By:BLOOMBERG
| Updated on: Nov 08 2022, 17:26 IST
iPhone 15 Pro to get iPhone SE 3, iPhone 8 type specs! Amazing Apple move
Foxconn
1/5 Are you waiting eagerly to get some exciting insights into the Apple iPhone 15 specs? Though there is still a year's time for the new iPhones' launch (expected in September, 2023), the leaks and rumors about it are creating a buzz amongst the fans. And as per the latest update, it is being said that the volume button and the power button of the two high end iPhone 15 models, iPhone 15 Pro and iPhone 15 Pro Max, may adopt a solid state button design similar to the home button design of iPhone 7, iPhone 8, iPhone SE 2 and iPhone SE 3. (REUTERS)
Foxconn
2/5 The information has been provided by Ming-Chi Kuo, analyst at TF International Securities over his Twitter handle. "My latest survey indicates that the volume button and power button of two high-end iPhone 15/2H23 new iPhone models may adopt a solid-state button design (similar to the home button design of iPhone 7/8/SE2 & 3) to replace the physical/mechanical button design," he tweeted. (HT Tech)
Foxconn
3/5 In a series of tweets, the analyst further informed that there will be Taptic Engines located on the internal left and right sides to provide force feedback to make users feel like they are pressing physical buttons. He went on to say that due to this design change, the number of Taptic Engines used in each iPhone will increase from the current one to three. As a result, the existing Taptic Engine suppliers, Luxshare ICT (1st supplier) and AAC Technologies (2nd supplier) will be significant beneficiaries. (AFP)
Foxconn
4/5 Also, it is expected that high-end Android smartphones will also follow Apple's design to create new selling points, which is a structural positive for the mobile phone vibrator industry, the analyst added. (AFP)
image caption
5/5 Analyst Kuo had earlier said that Apple is expected to create massive differentiation between iPhone 15 Pros and iPhone 15 standard models. "I believe Apple will create more differentiation between iPhone 15 Pros and iPhone 15 standard models to increase Pro shipment allocation and the new iPhone ASP (average selling price)," his tweet read. Kuo said that Apple may create differentiation between the iPhone 15 Pro Max and the iPhone 15 Pro models in order to generate more sales and profits in a mature market. (HT Tech)
Foxconn
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Foxconn, Apple’s key device assembly partner, has struggled to contain a Covid-19 outbreak at its facilities in Zhengzhou, China. (Bloomberg)

Morgan Stanley analysts have put a value on how much revenue is at risk for Foxconn Technology Group if its Zhengzhou operation is unable to ship any iPhones for the rest of the year as it battles a coronavirus outbreak.

Though deemed unlikely, the worst-case scenario for Foxconn's main listed unit, Hon Hai Precision Industry Co., would result in a 20% shortfall in expected sales for the current quarter, analysts led by Sharon Shih wrote in a research note Nov. 7. That would also entail a 36% drop in revenue from production of Apple Inc.'s iPhone.

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Foxconn, the Taiwanese manufacturer best known for being Apple's key device assembly partner, has struggled to contain a Covid-19 outbreak at its facilities in Zhengzhou, which have been subjected to a weeklong lockdown by China's Covid Zero policy enforcers. Some of its 200,000 staff at the plant opted to leave before the lockdown while others have been pushed into strict quarantine and so-called closed-loop business operation.

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The exodus of workers has disrupted output at the world's largest iPhone plant at a crucial time ahead of the holidays, and Foxconn has made preparations to bring backup production online and raise hourly wages by more than a third to attract more workers. The major threat to recovery now may be an extension of the lockdown, due to expire Nov. 9, or the imposition of other abrupt measures that may slow or halt assembly lines.

If Foxconn can get its production back on track and the Covid situation under control, sales will still take a hit in the first half of November but will recover from then on and into December, analysts at Citi wrote in a Nov. 6 note.

The Zhengzhou facilities are responsible for more than 85% of production capacity for the iPhone 14 Pro and Pro Max devices, according to Counterpoint senior analyst Ivan Lam. Those have been Apple's most in-demand handsets with this year's generation, though the Cupertino, California-based company said in a statement Sunday that it now expects lower shipments and delivery delays for those top-tier devices.

Hon Hai reported Monday that its October sales were up 41% compared to last year, but said it would be lowering its fourth-quarter forecast. The company is due to report its third-quarter results this Thursday.

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First Published Date: 08 Nov, 17:25 IST
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