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If you’re looking forward to the latest suite of Apple (AAPL) – Get Apple Inc. Report products from its first launch event held online last week, there maybe an unexpected kink that could disrupt your plans to upgrade to the new low-cost iPhone SE or the latest iPad Air 5 or the wildly popular Mac Studio.
The biggest manufacturer of Apple iPhones, Foxconn Technology Group has “suspended” operations in China’s industrial hub Shenzhen following a spike in Covid-19 cases in the region.
“The operation of Foxconn in Shenzhen China has been suspended from March 14 onwards in compliance with the local government’s new COVID-19 policy,” according to an emailed statement shared widely in media reports. “The date of factory resumption is to be advised by the local government,” Foxconn added.
Foxconn has specifically suspended production at its Longhua and Guanlan factories in Shenzhen, according to a report by Nikkei Asia.
“Due to our diversified production sites in China, we have adjusted the production line to minimize the potential impact,” Foxconn added in its statement.
These production halts have typically led to global chip shortages that affect several sectors and lead to manufacturing delays for products including smartphones, laptops, other electronics and auto equipment.
Last year, Apple’s iPhone clocked record sales in the holiday shopping quarter despite a $6 billion-plus hit from supply chain bottlenecks.
What Does This Mean for Your iPhone?
Foxconn’s production facilities in Shenzhen, in southern China, are considered a core hub for iPhone production as well as for some iPads and computers.
Wedbush analyst Dan Ives estimated that if Covid restrictions persist for two to three weeks it could hurt overall iPhone production by 1% to 2% for the quarter, in an interview with Yahoo Finance.
“It’s concerning. The vast majority of production comes out of that factory. If this lasts longer than a week, it starts to become a concern. For now Apple could shift to other production factories across China, but it puts gasoline on the fire,” said Ives.
Apple also has a large manufacturing hub in Zhengzhou in Henan Province in China where things continue to run smoothly.
Foxconn is trying to minimize damage by deploying backup plants to keep up with production targets.
“Much of the early engineering prototyping and research and development work [for Apple iPhones] is conducted at Foxconn’s campuses in Shenzhen,” Nikkei Asia reported.
In November last year, the biggest manufacturer of Apple iPhones also said that the global supply-chain crunch is expected to last until the second half of 2022.
Product Revenue Soared Despite Supply Constraints
At the end of Apple’s fiscal first quarter earnings, the tech giant saw revenue growth across all product categories, except for the iPad, which it had said suffered “particularly pronounced” supply constraints.
On March, we’re saying that where we will have — we will do better or have less constraints than we had in the December quarter,” said Apple Chief Executive Tim Cook in an earnings call from January.
On the product side, Apple revenue rose 9% to $104.4 billion at the end of fiscal first quarter ended Dec 25, despite significant supply constraints.
iPhone revenue grew 9% year-over-year to an all-time record of $71.6 billion.
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