Apple production shortfalls at China plant expected to result in loss of 6 million iPhone Pros
Apple and Foxconn raised their estimates of production shortcomings at the Zhengzhou plant over the past two weeks
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Tumult at Apple's key manufacturing plant in Zhengzhou, China, is expected to result in production being short nearly 6 million iPhone Pro devices.
The expectation of lost production at the Chinese plant could change, a person familiar with the matter told Bloomberg, but the situation will depend on the speed at which Foxconn Technology Group, the Taiwanese company that operates the facility, is able to bring people back to assembly lines following China's strict coronavirus restrictions. Production could be set back even further if lockdowns continue.
The Zhengzhou hub has been impacted by lockdowns and worker unrest for weeks after COVID infections left Foxconn and the local government struggling to control the virus outbreak. Thousands of employees fled last month amid chronic food shortages. New employees were then hired who protested against pay and quarantine.
The Foxconn facility produces most iPhone 14 Pro and Pro Max devices, in-demand units that have picked up the lack of demand for the regular iPhone 14. Apple cut its overall production target to about 87 million units from an earlier projection of 90 million units, according to Bloomberg.
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Tumult at Apple's key manufacturing plant in Zhengzhou, China, is expected to result in production being short nearly 6 million iPhone Pro devices. (AP Photo/Kathy Willens, File / AP Newsroom)
Apple and Foxconn raised their estimates of production shortcomings at the Zhengzhou plant over the past two weeks because of growing disruptions, according to the person familiar with the matter, who also said the company expects to be able to make up for the lost 6 million devices in 2023.
"It demonstrates that everyone, even Apple, is susceptible to supply-chain constraints in China due to COVID," Moor Insights & Strategy's Anshel Sag told Bloomberg.
The Apple plant's likely shortfall is among the more bearish of expectations from analysts. Morgan Stanley analysts estimated earlier this month that the iPhone Pro model deficit would be about 6 million units this year. However, that estimation came prior to protests in Zhengzhou last week against COVID restrictions.
The turmoil in Zhengzhou is a reminder of the risks Apple faces in having its vast supply chain in China. Foxconn attempted to stop protests by offering a bonus to any workers who chose to return home. The company added a bonus over the weekend of as much as $1,800 per month for full-time employees remaining at the factory through December and January.
China immigration inspection officers in protective overalls march near a container ship at a port in Qingdao in eastern China's Shandong province. (Chinatopix via AP / AP Images)
The protests in Zhengzhou made an already challenging business environment worse. The facility has as many as 200,000 workers during peak iPhone production season. More than 20,000 new hires reportedly left after the protests.
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New workers leaving has not hurt production as much as the quarantines imposed on existing employees because of their experience and skill, another person familiar with assembly operations told Bloomberg. Foxconn is actively recruiting more employees, with the help of government officials.
Apple and Foxconn said earlier this month that shipments of the iPhone 14 Pro and Pro Max will be lower than previously expected due to China’s lockdowns.
Workers protest at Foxconn iPhone plant in China
Hundreds of workers joined protests at Foxconn's iPhone factory in China (Video: AP)
In Morgan Stanley’s analysts' worst-case scenario for Apple and Foxconn, the Zhengzhou facility will not be able to ship any iPhones for the rest of the year, resulting in a 20% shortfall in expected sales for Foxconn in the current quarter, analysts wrote on November 7.
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Asymmetric Advisors' analyst Amir Anvarzadeh said nothing can be done to prevent Apple and Foxconn from feeling the impact of China’s COVID policies, which will likely encourage the company to look for alternative manufacturing locations like India and Vietnam.
"It will force Apple to accelerate the diversification of its production base," he said.