Foxconn says it’s restoring production at the world’s largest iPhone factory

By Juliana Liu, CNN Business

Hong Kong CNN Business  —  Apple supplier Foxconn says it is “gradually” restoring production capacity at its sprawling campus in central China, which has been hit by Covid-19 restrictions and worker protests since October.

The “epidemic situation” at the facility, known as iPhone City and normally home to hundreds of thousands of workers, has been brought under control, the Taiwanese contract manufacturer said in a statement on Monday.

“We have also started to recruit new employees, and are gradually moving toward the direction of restoring production capacity to normal,” it said, adding that the outlook for the fourth quarter was expected to be in line with market consensus.

Foxconn did not provide further details. Its executives were quoted as telling Reuters that full production would resume between late December and early January.

The ongoing supply disruptions at Foxconn’s campus in the city of Zhengzhou were costing Apple roughly $1 billion a week in lost iPhone sales, Daniel Ives, an analyst at Wedbush Securities, had told CNN Business. He estimates that Apple is short of between 10 million and 15 million iPhones in the vital holiday shopping season.

The troubles started in October when workers left the campus because of concerns about working conditions and shortages of food. Short on staff, bonuses were offered to workers to return.

But protests broke out last month when newly-hired staff said management had reneged on their promises. Workers clashed with security officers, before the company eventually offered them cash to quit and leave.

Analysts said the production woes at iPhone City would speed up the pace of Apple’s supply chain diversification away from China.

In recent weeks, according to The Wall Street Journal, Apple (AAPL) has accelerated plans to shift some of its production outside China. It was reportedly telling suppliers to plan more actively for assembling Apple (AAPL) products elsewhere in Asia, particularly India and Vietnam.

Apple did not immediately respond to a request for comment.

“The shift out of China will not be easy and come with clear logistical, engineering, and infrastructure hurdles as the aggressive move to India and Vietnam now begins with the Apple ecosystem alerted,” Ives wrote in a research report on Sunday.

If Apple moves aggressively, more than 50% of iPhone production could come from India and Vietnam by the 2025/2026 fiscal year, versus the single-digit percentage currently, he added.

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