Models such as the iPhone 14 Pro Max, which starts at about $1,100, are integral to Apple’s strategy of increasing revenue when growth in the overall global smartphone marketis slowing. That strategy took a hit in October when Covid-19 outbreaks hit the main manufacturing base for iPhone Pro models, operated by Foxconn Technology Group in the central Chinese city of Zhengzhou.
China has lifted most Covid-control measures, the leading issue at factories around the country is worker health. Nationwide, at least tens of millions of Chinese arebelieved to have caughtthe coronavirus.
It isn’t known what percentage of Foxconn workers in Zhengzhou have Covid-19, but workers there said they knew of many people around them who developed fevers or other Covid-19 symptoms. The workers said some of those afflicted continued to work while others took time off. They said it was hard to know who actually had Covid-19 because the country has stopped widespread testing and test kitsare in short supply.
Fears that additional turmoil in China could hit Apple production and sales in the country into the new year helped push Apple stock down 3.07% in Wednesday trading to $126.04, the lowest level since June 2021.
Nonetheless, analysts and people involved in the supply chain say the situation in China, while far from normal, is at least better than during the Foxconn worker clashes in November.
“Supply is improving and inching slowly toward parity with demand,” J.P. Morgan analystSamik Chatterjeewrote in a note to investors this week about the iPhone 14 Pro.
Wait times for U.S. consumers ordering the latest iPhone Pro models, which once extended to 40 days, have improved, according to J.P. Morgan.
In the U.S. and China, Apple’s websites show wait times for Pro models at around one to two weeks. Certain Pro models and colors are available for immediate pickup at some Apple stores in both countries.
On Dec. 8, Foxconn, Apple’s sole assembler of high-end iPhone models, said it ended the movement restrictions at its Zhengzhou facility after more than 50 days.
The parts of the facility that produce iPhones have recovered somewhat and are operating at about 70% capacity, according to analysts and people involved in the supply chain. Still, Foxconn is struggling to recover full normalcy, they said.
Taiwan-based research firm TrendForce said labor shortages are affecting supply chains in China. It forecast iPhone shipments would total 47 million units in the January-March quarter, down 22% from a year earlier and below its previous forecast of 56 million units issued in late October. The figures include all iPhone models.
This week, Foxconn offered a bonus equivalent to about $700 for key manufacturing workers who are willing to stay on the line through March 20. That differs from the usual pattern in which Foxconn ramps up staffing in the summer and fall to meet holiday demand, then pulls back after the shopping season is over.
Sometimes called “iPhone City,” the Zhengzhou facility employs as many as 300,000 workers at peak times to make iPhones and other Apple products. At one point, the city alone made about 85% of the Pro lineup of iPhones, according to market-research firm Counterpoint Research.
Foxconn, formally known as Hon Hai Precision Industry Co., has moved some of its iPhone production to its other facilitiesin the southern city of Shenzhen.
Regardless of the short-term production ups and downs, people involved in the supply chain say Apple is looking over the mid- to long-term todiversify its supply chain to more places outside China such as India and Vietnam. The past year has highlighted the political and business risks of concentrating so much production in China.
Foxconn has been assembling iPhones in India and has recently ramped up its technology so it canstart manufacturing some new iPhone models in Indiaat nearly the same time as Chinese factories.
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