Apple Supplier Foxconn to Remain Closed Amid Coronavirus Outbreak

Operations within Apple iPhone maker Foxconn will remain closed 'until further notice,' another sign the coronavirus is hurting the Chinese and global economies.
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Most operations within Apple (AAPL) - Get Report iPhone maker Foxconn will remain closed “until further notice,” another sign of the impact the novel coronavirus is having on both the Chinese economy as well as companies’ global supply chains.

Hon Hai Precision Industry Co., better known as Foxconn, sent a message via its internal app on Sunday that it wouldn’t be able to decide on a back-to-work date “until further notice” for its iDPBG business unit, according to a version reviewed by Bloomberg News.

That specific division makes gadgets for Apple at a factory based in Zhengzhou in central China, as well as two other plants in Shenzhen. 

It wasn't immediately clear how many employees received the message and whether other workers have been summoned back after the plants were shut down for both the Chinese Lunar New Year and as an additional precaution to contain the virus.

Foxconn told employees at its Shenzhen headquarters, also known as iPhone City, not to return to work when the extended Lunar New Year break ended Feb. 10, according to a memo obtained by Bloomberg. 

The company said on Monday that its factories will comply with Chinese government requirements and resume output in an “orderly manner” by staggering the return of workers. In some cases, the government has ordered companies to switch their production to making face masks and other gear to protect against the virus.

Foxconn did receive approval to resume production at its plant in the eastern central Chinese city of Zhengzhou, a person with direct knowledge of the matter told Reuters on Monday. However, the company not yet been allowed to restart production in Shenzhen.

The two factories together make up the bulk of Foxconn’s assembly lines for Apple’s but only 10% of the factory’s workforce has managed to return so far, the source said.

Apple and other companies that rely on Chinese manufacturers to make their physical products have been struggling to offset the production hits they've suffered. Factories have been shut down and also entire supply chains that normally whisk not only finished products but components of products around the world.

While production from China generally slows leading into the widely celebrated Chinese Lunar New Year, a government-mandated extension of the holiday as a way to prevent the spread of the virus has already impacted both U.S. and international companies that utilize China's massive factory supply chain and powerhouse workforce.      

Not all of Foxconn's employees returned to their hometowns for the holiday break so there’s still some available workers on production sites, according to people familiar with the plant operations. But it’s unclear as to how many such workers are on hand.

All of this may prompt Apple to postpone the launch of its more-economical SE2 iPhone that was expected to hit the market as early as next month. According to reports, production of the SE2 likely will be delayed to March or April due to the factory closures.   

Shares of Apple were down 1.17%, or $3.75 a share, at $316.28 in premarket trading on Monday.