With the coronavirus claiming the life of 490 people and infecting 24,324 at last count, a number of businesses in China have cut back their operations or have closed altogether. This hits Apple right in the solar plexus since the company depends on contract manufacturers located in China to produce many of its products including the iPhone. The virus also impacted some of Apple's China-based supply chain.
Bloomberg reports today that the Chinese manufacturer that Apple relies on the most, Foxconn (aka Hon Hai Precision Industry Co.) will resume production on February 10th. Other companies like Quanta Computer Inc., Inventec Corp., and LG Display Co. will also go back to work next week. TF International analyst Ming-Chi Kuo recently cut his estimate of iPhone shipments for the current quarter by 10%. For the calendar first-quarter (Apple's fiscal second-quarter), Kuo now sees the company delivering 36 million to 40 million iPhones. Apple no longer releases the number of phones it ships during its quarterly reports, but the analyst believes that the manufacturer delivered 38 million during last year's calendar first-quarter. So for the three months from January through March, he sees iPhone shipments declining as much as 5.3% or rising by as much as that same percentage.
Foxconn is planning on resuming its production schedule on February 10th
The February 10th date when production is supposed to ramp up again at Foxconn isn't exactly written in stone. Some workers are living in municipal lockdowns and transportation of people and materials has slowed down tremendously. The facility where Foxconn builds most of its iPhones is located in Zhengzhou and the factory used by assembler Pegatron to build the device is in Shanghai. Both are more than 311 miles away from Wuhan, the city in China considered to be ground zero for the coronoavirus.
Earlier this week, Apple said that it would shut its stores, corporate offices and consumer centers through February 9th due to an "abundance of caution and based on the latest advice from leading health experts." Apple is still able to ship orders throughout the country, so those looking to pick up a new iPhone in China won't be blocked because of the virus.
Meanwhile, GF Securities analyst Jeff Pu says that companies in the supply chain are seriously concerned about a lack of employees. He notes that "The main variable is whether the government will push back the time for resuming production, though it is not very likely given the complexities of organizing transportation for the returning migrant workers." Apple has more than 10,000 direct workers in China including those working in the Apple Stores. The firms that makeup Apple's contract manufacturers and supply chain in China have over 1 million people producing parts and assembling Apple's products.
While it was feared a week ago that the virus could delay the launch of the iPhone 9, Foxconn now says that it has a backup plan that will allow the next new iPhone model to be released on schedule. As we told you during the waning days of January, trial production of the phone has already started. The iPhone 9 will look like the iPhone 8 down to the 4.7-inch LCD display. But unlike the iPhone 8 which is powered by the 10nm A11 Bionic chipset, the iPhone 9 will be equipped with the same 7nm A13 Bionic SoC found in the 2019 iPhone models. The new device will also be the beneficiary of a 50% hike in memory from 2GB of RAM to 3GB. We could see the iPhone 11's 12MP Wide camera on the back along with a 1,821mAh battery. The iPhone 9 is expected to start at $399 and could be unveiled next month.