Covid threatens Apple with big iPhone delays as pandemic cases swell in China

The tech giant faces further supply chain disruption after an outbreak of the virus at ‘iPhone City’, the huge assembly plant run by Foxconn in Zhengzhou.

A store representative helping customers at an Apple Store in Beijing. Picture: Nicolas Asfouri/AFP

Apple is facing fresh manufacturing delays for the latest iPhone amid a mass outbreak of Covid-19 in China in which nearly a fifth of the entire population has contracted the virus.

Analysts have warned that the tech giant faces further supply chain disruption after an outbreak of the virus at “iPhone City”, the huge assembly plant run by Foxconn in Zhengzhou.

Covid-19 cases in the world’s second-largest economy have rocketed this month after Beijing lifted lockdown restrictions after nationwide protests against the stringent shutdown rules. Authorities on Friday said an estimated 250 million people tested positive for the virus in the past 20 days. China’s National Health Commission has not reported any deaths from the virus in the past four days.

About 90 per cent of Apple’s products are produced in China, but turmoil at the world’s largest iPhone factory has forced the Californian company to consider moving manufacturing to other locations in an attempt to improve the resilience of its global supply chain and to manage geopolitical tensions. Apple is accelerating plans to produce iPads in India for the first time, having started production of its newest iPhone 14 and older models in the country. It is also exploring plans to produce MacBooks in Vietnam, according to media reports.

Ming-Chi Kuo, an analyst at TF International Securities, warned Apple was on course to “cancel or postpone” mass production of the SE4 model, a cheaper priced smartphone, because of cost pressures resulting from the expected global recession next year.

Apple had already been hit by lockdown-related supply chain delays that have been repeatedly imposed since February, which will be worsened by the outbreak of Covid at the Zhengzhou mega facility.

Bindiya Vakil, chief executive of Resilinc, a California-based group that provides supply chain mapping services, told the Financial Times: “We should be seeing a lot of operations get impacted by absenteeism, not just at factories, but warehouse, distribution, logistic and transportation facilities as well.”

Reports from the Foxconn factory, which employs more than 200,000 people, said some workers were being forced to work despite contracting the virus to help catch up on delayed production on the latest iPhone models. Seven Foxconn workers told the tech website Rest of World they had caught the virus after joining the factory this month and were ordered to keep working despite showing symptoms. Foxconn has struggled to meet production targets after employees protested over conditions and wages last month.

Apple has enjoyed 14 consecutive quarters of revenue growth, but this run is under threat. Kuo estimates labour shortages and production delays mean the tech giant is facing a shortage of 15 million units of its latest iPhone. Analysts expect the company’s annualised revenues for the last quarter of the year will fall below the record $US124bn ($A185.30bn) hit this time last year. Apple shares have fallen 27 per cent this year to dollars 131.86.

The Times