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Foxconn COVID woes may hit up to 30 per cent of iPhone November output

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COVID-19 woes at Foxconn’s iPhone assembly plant in China’s Zhengzhou city could slash the site’s November output of the Apple Inc (AAPL.O) device by as much as 30 per cent, a person with direct knowledge of the matter said on Monday.

Foxconn, formally Hon Hai Precision Industry Co Ltd (2317.TW), is working to boost production at its factory in Shenzhen city to make up for the shortfall, said the person, declining to be identified as the information was private.

The Zhengzhou plant in central China, which employs about 200,000 people, has been rocked by discontent over stringent measures to curb the spread of COVID-19 within the site, with several workers fleeing the facility over the weekend.

The possible impact on production comes amid a traditionally busy time for electronics makers ahead of the year-end holiday season, which is also a prime time for vendors such as Apple.

Foxconn on Sunday said the situation was being brought under control and that it would coordinate back-up production with other plants to reduce potential impact. Its share price fell 1.9 per cent on Monday versus a 1.1 per cent rise in the broader market (.TWII).

Apple did not respond to a request for comment.

Foxconn is Apple’s biggest iPhone maker, producing 70 per cent of iPhone shipments globally which in turn makes up 45 per cent of the Taiwanese firm’s revenue, analysts at Taipei-based Fubon Research said this month.

It also builds the device in India and southern China, but its Zhengzhou factory assembles the majority of its global output.

A second person familiar with the situation said many workers remained at the Zhengzhou plant and that production was continuing.

STRICT COVID-19 MEASURES

Under China’s ultra-strict zero-COVID-19 policies, localities must act swiftly to quell outbreaks, with measures including full-scale lockdowns.

Factories in affected areas are often allowed to stay open on condition they operate under a “closed loop” system where staff live and work on-site. Businesses have said such arrangements pose numerous difficulties.

Foxconn on Oct. 19 banned dining at canteens at the Zhengzhou plant and required workers to eat meals in dormitories. It said production was normal.

The measures led to people who said they worked at the site venting frustration about their treatment and provisions via social media.

Scores fled the site over the weekend, with photographs and videos on social media purporting to show Foxconn staff trekking across fields in daytime and along roads at night. Reuters could not immediately verify the authenticity of the posts.

Foxconn and local authorities have not disclosed the number of any infected workers at the site. Zhengzhou, capital of central Henan province, has since Oct. 19 reported 264 locally transmitted COVID-19 cases.

Foxconn implemented closed loop measures in March and July this year at its smaller Shenzhen factory as cases in the southern city rose.

In May, the Shanghai plant of another Apple supplier, MacBook assembler Quanta Computer Inc (2382.TW), was also hit by worker chaos after the discovery of COVID-19 cases despite a closed-loop system being put in place.

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