Major Apple Supplier Goes Into Closed-Loop Production Due To COVID Resurgence In China: Will It Impact Q4 iPhone Shipments?

Apple, Inc. AAPL just reported a solid quarter, standing tall amid the big tech ruins. The company, however, could be supply-constrained in the running quarter due to ongoing COVID incidences in China.

Apple supplier Hon Hai Precision Manufacturing Company Limited HNHPF, aka Foxconn, originally planned to gradually reduce iPhone production capacity, but after its Zhengzhou iPhone plants entered closed-loop production without warning, those plans will likely be postponed, Taiwan-based analyst Ming-Chi Kuo said.

With the plant’s closure, more than 10% of global iPhone production capacity is currently affected, the analyst said. This incident hasn’t altered the current iPhone supply chain management forecast, given the expectation that production capacity will gradually improve within a few weeks, he added.

The analyst expects a limited impact on the fourth-quarter iPhone shipments.

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Kuo also noted that Apple is discussing with other suppliers, namely Pegatron and Luxshare ICT, to switch the iPhone 14/14+ production line to iPhone 14/iPhone 14 Pro Max. Luxshare ICT will likely start shipping the iPhone 14 Pro in the early first quarter of the calendar year 2023 at the earliest, he said.

“This incident may be a limited impact on 4Q12 iPhone shipments. However, suppliers in China must learn to improve closed-loop production efficiency in response to the zero-Covid policy,” Kuo said.

Apple closed Friday's session up 7.56% at $155.74, according to Benzinga Pro data.

Photo: Courtesy of ILO Asia-Pacific on flickr