Foxconn Says Cautiously Resuming China Output, Warns Coronavirus Will Hit Revenue

Apple’s iPhone maker Foxconn said on Thursday it was cautiously reproducing it at its major factories in China and warned that revenue would be hit this year by the Corona virus.

The statement comes a few days after Apple canceled its sales guidance in the first quarter of March, saying that factories in China were slower to return to work than expected for the first time after the Lunar New Year holiday was extended amid an outbreak.

Foxconn, the world’s No. 1 contract manufacturer, said its factories in countries such as Vietnam, India and Mexico were continuing to work to full capacity with ongoing expansion plans while seeking to reduce the impact of the virus.

On mainland China, manufacturers struggle with a logistical nightmare because many workers who depend on them cannot return to work, which is hampered by travel and quarantine restrictions. The restrictions, which vary across the province, city, and local area, make it difficult to transport goods.

Foxconn has not indicated the magnitude of the impact that may occur on revenue or give an estimate.

Analysts expected the Taiwanese company to generate revenues of about $ 11.9 billion for 2019, before the disease was widely known. It is scheduled to announce fourth quarter revenue in March.

Reuters reported this month that Foxconn could see a major impact on production and that the company was using factories in other countries to bridge the gap.

The company, dubbed the Hon Hai Precision Industry, hopes to have production levels in China at half the normal levels by the end of February, a source familiar with the matter told Reuters last week.

Foxconn said the Reuters reports were unrealistic but did not provide details.

KGI, a Taiwanese brokerage company, estimates that Foxconn factories in China will operate between 30 and 40 percent of normal production levels by the end of February, and that this quarter’s revenue could drop 46 percent from the fourth quarter.

Canalys appreciates Apple and Huawei, which is also a Foxconn customer, that owns 99 percent of its production in China. Analysts also said sales in the world’s largest smartphone market could drop in half in the first quarter.

TrendForce reduced its forecast for Apple’s iPhone production this quarter by 10 percent to 41 million units, and warned that it could drop again by 5-7 percent, depending on how well Chinese factories are increasing production.

Foxconn shares have lost nearly nine percent this year so far.

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