Kuo Warns of Delays and Low Labor Return Rates at Apple Supplier Factories in China Due to Coronavirus [Updated]

Apple analyst Ming-Chi Kuo today sent out a note to investors warning them to pay close attention to the epidemic changes of the coronavirus outbreak in China as it is impacting Foxconn, Pegatron, and other Apple suppliers.

In the note, Kuo outlines the status of several major Apple suppliers as workers prepare to return to factories to resume production on Apple products.

foxconn
Foxconn's Zhengzhou site, which Kuo says is the most critical production site for the iPhone 11 and the upcoming low-cost iPhone, is seeing significant delays. Foxconn originally planned to resume work on February 2, but that has been postponed by at least one week. Kuo estimates that the labor return rate will be 40 to 60 percent of what it was prior to the Lunar New Year holiday when the facility reopens.

Work at Foxconn's Shenzhen location focuses on the new 2020 iPhones, and the development team there, which accounts for 30 percent of total manpower, did not take a break during the holiday. Kuo says the plan initially filled other manpower gaps, but it has been postponed for at least a week. Labor return rates are estimated at 30 to 50 percent.

Foxconn has moved production equipment to its sites in Taiyuan and India because of the delays in China, but production capacities are limited in those locations.

A report yesterday suggested that Chinese health officials had denied Foxconn's plans to reopen its factories after conducting on-site inspections and finding fault with poor airflow and the use of central air conditioning, but Chinese authorities in a statement today said that they had not blocked Foxconn from resuming production.

According to new information from Reuters, officials in Shenzhen's Longhua district where Foxconn's largest factory is located said that the report was untrue and that it was still conducting checks. Production at Foxconn facilities will restart when inspections have been completed, and Foxconn has submitted coronavirus prevention proposals that include temperature checks, requiring employees to wearing masks, and implementing a safe dining system.

Pegatron, another Apple supplier, resumed work on ‌iPhone 11‌ production and new iPhone 12 development at its Shanghai factory on February 3, with a labor return rate of 90 percent, but Kuo believes that the labor rate will fall to 60 or 70 percent because many factory employees will resign after they get paid in February.

Pegatron's Kunshan factory in charge of production on the new low-cost ‌iPhone‌ was meant to return to work on February 10, but that has been postponed "at least several days" with an estimated labor return rate of 40 to 60 percent when it reopens.

Kuo declined to provide new shipment forecasts because "there are still many uncertainties," but last week he lowered his iPhone shipment forecast by 10 percent to 36 to 40 million units during Q1 2020 due to the coronavirus.

Depending on when Apple's supplier factories reopen, there could be a significant impact on device supplies resulting in longer shipping and wait times for new devices and potential delays for devices rumored to be to launching early in the year like the low-cost ‌iPhone‌.

Update: Reuters reports that, as of February 10, under 10 percent of Foxconn's workforce have returned to its Zhengzhou factory. The report claims that Foxconn has not yet been allowed to resume operations at its Shenzhen facility.

Update: Reuters now reports that Foxconn has received Chinese government approval to resume production at its Shenzhen factory.

Top Rated Comments

impulse462 Avatar
21 months ago
Hopefully these workers aren't forced to come in and make phones while being worried about being infected by the coronavirus. they are already treated like ****. everyone can wait a few extra months for their new instagram-time sucking machine.
Score: 17 Votes (Like | Disagree)
Baymowe335 Avatar
21 months ago
Seems as of now to be a low impact.

Apple is likely burning through inventory, but still has cushion. More delays could cause problems, but people will ultimately wait for their iPhones.

If anything, this just shifts units to the next quarter.

I have a lot of confidence in Apple’s world class supply chain.
Score: 6 Votes (Like | Disagree)
realeric Avatar
21 months ago
The new coronavirus will be pandemic worldwide soon. It's too late to be stopped. Yes, you might see a doctor if you survived in a line for days outside a hospital. Then the guard in front of the hospital will say "Sorry, we have no space for you. Go back home". I was told this were happening in China now.

Buy N95 masks, sanitizer, and food. Oh, you can't buy the mask as all are already sold out.
Score: 5 Votes (Like | Disagree)
jzuena Avatar
21 months ago

Corona virus loses viability at higher 38C+ temperatures and >95% humidity so either move manufacturing to Malaysia, Indonesia, Thailand, etc. or mimic the environmental parameters in China.
So, you are saying they should make the Foxconn factories literal sweat shops?
Score: 5 Votes (Like | Disagree)
mi7chy Avatar
21 months ago
Corona virus loses viability at higher 38C+ temperatures and >95% humidity so either move manufacturing to Malaysia, Indonesia, Thailand, etc. or mimic the environmental parameters in China.
Score: 3 Votes (Like | Disagree)
impulse462 Avatar
21 months ago

Yeah...some of us use our phones for business purposes so please speak for yourself.
your business needs are not more important than people's lives
Score: 3 Votes (Like | Disagree)

Top Stories

affinity designer contour tool

Serif Updates Affinity Photo, Designer, and Publisher With New Tools and Functions

Thursday February 4, 2021 1:58 am PST by
Serif today announced across-the-board updates for its popular suite of Affinity creative apps, including Affinity Photo, Affinity Designer, and the Apple award-winning Affinity Publisher for Mac, all of which were among the first professional creative suites to be optimized for Apple's new M1 chip. "After another year which saw record numbers of people switching to Affinity, it's exciting to...
studio buds family

Beats Studio Buds Debuting Today With Active Noise Cancellation, Stemless Design, and More for $150

Monday June 14, 2021 8:00 am PDT by
We've seen a lot of teasers about the Beats Studio Buds over the past month since they first showed up in Apple's beta software updates, and today they're finally official. The Beats Studio Buds are available to order today in red, white, and black ahead of a June 24 ship date, and they're priced at $149.99. The Studio Buds are the first Beats-branded earbuds to truly compete with AirPods...
General Apps Messages

Android iMessage Competitor Puts Pressure on Apple

Friday July 30, 2021 3:15 am PDT by
Google and the three major U.S. carriers, including Verizon, AT&T, and T-Mobile, will all support a new communications protocol on Android smartphones starting in 2022, a move that puts pressure on Apple to adopt a new cross-platform messaging standard and may present a challenge to iMessage. Verizon recently announced that it is planning to adopt Messages by Google as its default messaging...
maroon5memories

Apple Collaborates With Maroon 5 to Add 'Memories' Song to Photos App

Wednesday September 25, 2019 12:02 pm PDT by
Apple has teamed up with Maroon 5 to add the group's new song "Memories" to the Memories feature in the Photos app, allowing it to be used for photo slide show creations, reports Billboard. "Memories" will be available as a soundtrack option for a limited time and it is available to iPhone and iPad users running the latest iOS 13 and iPadOS software. Memories in the Photos app are created ...
qualcomm snapdragon x60 5g

iPhone 13 Lineup Expected to Use Qualcomm's Snapdragon X60 Modem With Several 5G Improvements

Wednesday February 24, 2021 8:10 am PST by
Apple's next-generation iPhone 13 lineup will use Qualcomm's Snapdragon X60 5G modem, with Samsung to handle manufacturing of the chip, according to DigiTimes. Built on a 5nm process, the X60 packs higher power efficiency into a smaller footprint compared to the 7nm-based Snapdragon X55 modem used in iPhone 12 models, which could contribute to longer battery life. With the X60 modem, iPhone...
iPhone 13 Wi Fi 6E feature update

Wi-Fi 6E Explained: What It Could Mean for iPhone 13 and Beyond

Monday August 2, 2021 8:00 am PDT by
The iPhone 13 is widely expected to come with Wi-Fi 6E capabilities, and while it may seem rather nuanced to the average consumer, with only improved speeds and being "up to date" in the realm of Wi-Fi technology, it's actually a fairly significant improvement, laying the groundwork for much of what we know the future holds. To truly understand Wi-Fi 6E, MacRumors sat down for an exclusive...
iphone 12 colors 2021

iPhone 12 Colors: Deciding on The Right Color

Thursday November 5, 2020 8:35 am PST by
The iPhone 12 and iPhone 12 Pro arrived in October 2020 in a range of color options, with entirely new hues available on both devices, as well as some popular classics. The 12 and 12 Pro have different color choices, so if you have your heart set on a particular shade, you might not be able to get your preferred model in that color. iPhone 12 mini and iPhone 12 The iPhone 12 mini and iPhone...
m1 imac orange

New iMac Tidbits: Headphone Jack on Side, Ethernet Port on Power Adapter, Spatial Audio and WiFi 6 Support, No SD Card Slot

Wednesday April 21, 2021 6:38 am PDT by
Apple yesterday announced a completely redesigned 24-inch iMac with the M1 Apple silicon chip. The new iMac, the first major redesign of the Mac desktop computer since 2012, has several changes compared to the previous generation. In the aftermath of the event, a few new features and tidbits may have slipped under the radar, so we’ve compiled this list of some of the less-talked-about...
original iphone

Phil Schiller Says iPhone Was 'Earth-Shattering' Ten Years Ago and Remains 'Unmatched' Today

Monday January 9, 2017 7:15 am PST by
To commemorate the tenth anniversary of the iPhone, Apple marketing chief Phil Schiller sat down with tech journalist Steven Levy for a wide-ranging interview about the smartphone's past, present, and future. The report first reflects upon the iPhone's lack of support for third-party apps in its first year. The argument inside Apple was split between whether the iPhone should be a closed...
os x mountain lion macs 16x9 2

Apple Makes OS X Lion and Mountain Lion Free to Download

Wednesday June 30, 2021 12:19 pm PDT by
Apple recently dropped the $19.99 fee for OS X Lion and Mountain Lion, making the older Mac updates free to download, reports Macworld. Apple has kept OS X 10.7 Lion and OS X 10.8 Mountain Lion available for customers who have machines limited to the older software, but until recently, Apple was charging $19.99 to get download codes for the updates. As of last week, these updates no...