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'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

(View all)
Avatar
7 weeks 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)
Avatar
7 weeks 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)
Avatar
7 weeks 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)
Avatar
7 weeks 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)
Avatar
7 weeks 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)
Avatar
7 weeks 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

Apple Acquires Weather App Dark Sky

Tuesday March 31, 2020 10:22 am PDT by Juli Clover
Apple has acquired weather app Dark Sky, Dark Sky's developers announced today. Dark Sky is one of the most popular weather apps on the App Store, known for its accuracy and storm warnings. Our goal has always been to provide the world with the best weather information possible, to help as many people as we can stay dry and safe, and to do so in a way that respects your privacy. There is no ...

Seemingly Unreleased Version of Logic Pro X With Live Loops Appears on Apple's Education Site [Updated]

Sunday March 29, 2020 7:23 am PDT by Hartley Charlton
Update: Apple has replaced the Logic Pro X image with an older version. Original story follows. A seemingly unreleased version of Logic Pro X has appeared on Apple's education site, as spotted by a Reddit user. The image from Apple's education products page shows a 16-inch MacBook Pro running Logic Pro X, but with a familiar interface that looks extremely similar to GarageBand's Live Loops ...

Bloomberg: Apple's 5G iPhone Still on Schedule for Fall Launch, But Future Products Could Be Delayed

Monday March 30, 2020 2:40 am PDT by Tim Hardwick
Apple's 5G iPhone is still on track to launch within the company's typical annual fall release schedule, according to a new Bloomberg report on filed on Monday. Signs are that Apple's Chinese-centric manufacturing -- of which Hon Hai is the linchpin -- is slowly getting back on track. The next iPhones with 5G wireless capabilities remain on schedule to launch in the fall, partly because mass...

Case for Upcoming Low-Cost iPhone Shows Up at Best Buy With Alleged April 5 Stock Date

Monday March 30, 2020 4:25 pm PDT by Juli Clover
Apple has a new low-cost iPhone in the works, which is supposed to be launching sometime in the first half of 2020. Given the ongoing situation in the United States and other countries, it's been unclear if the device is going to launch within the planned timeline, but there are signs that it could be coming soon. We started seeing cases for the new low-cost iPhone back in early February,...

Testing Brydge's New Pro+ Keyboard With Trackpad for iPad Pro

Monday March 30, 2020 2:04 pm PDT by Juli Clover
Well ahead of when Apple introduced trackpad support in iOS 13.4, Brydge announced an iPad Pro keyboard with a built-in multi-touch trackpad. We have one of Brydge's new Pro+ keyboards on hand, and thought we'd check it out to see how it works with Apple's new 2020 iPad Pro models. Subscribe to the MacRumors YouTube channel for more videos. The Brydge Pro+ keyboard is similar in design to...

Apple's Work on New Upcoming Products Progressing Normally as Employees Adjust to Telecommuting

Monday March 30, 2020 11:58 am PDT by Juli Clover
Apple's development of upcoming products is progressing as usual despite the fact that Apple employees around the world are working from home, according to a new report today out from Bloomberg. Apple is still working on new versions of the HomePod, Apple TV, MacBook Pro, budget iPads, Apple Watch, iPhone, and iMac, all of which could be released "as early as later this year" and have been...

Apple Releases ProRes RAW Beta for Windows

Monday March 30, 2020 9:33 am PDT by Juli Clover
Apple today released ProRes RAW for Windows in a beta capacity (via Mark Gurman), with the software designed to allow ProRes RAW and ProRes RAW HQ video files to be watched in compatible applications on Windows machines. According to Apple, the software will let the files be played within several Adobe apps: Adobe After Effects (Beta) Adobe Media Encocder (Beta) Adobe Premiere...

2020 iPad Pro Teardown Provides Closer Look at LiDAR Scanner and Confirms Incremental Update

Saturday March 28, 2020 9:56 am PDT by Hartley Charlton
iFixit today shared a video teardown of the new iPad Pro, which Apple unveiled earlier this month. iFixit found that most of the internals of the 2020 iPad Pro are the same as the 2018 model, confirming that the device is a relatively incremental update. The most notable new feature seen inside the new iPad Pro was the LiDAR scanner, which measures the distance to surrounding objects up...

Apple Configurator 2 Updated With New Features, Including Support for Restoring Firmware on 2019 Mac Pro

Tuesday March 31, 2020 5:34 am PDT by Joe Rossignol
Apple Configurator 2 has been updated to version 2.12 with several improvements, including support for restoring firmware on the 2019 Mac Pro. The release notes:• Added support for restoring firmware on the 2019 Mac Pro • Allow access to websites using TLS 1.0 and 1.1 • VPN: Configure Provider Designated Requirement for Custom SSL connection type • VPN: Configure network options for ...

U.S. Government Using Mobile Ad Location Data to Track Compliance With Curbs on Movement

Monday March 30, 2020 4:48 am PDT by Tim Hardwick
The U.S. government is using smartphone location data from the mobile ad industry to track people's movements amid the coronavirus outbreak, according to a Wall Street Journal report. Local governments and the Centers for Disease Control and Prevention have received the anonymized data about people in areas of "geographic interest," with the aim being to create a portal of geolocation...