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

Apple iPhone maker Foxconn said on Thursday it is cautiously restarting production at its main plants in China and warned revenue will be hurt this year by the coronavirus epidemic.

The statement comes just days after Apple rescinded its March quarter sales guidance, saying factories in China have been slower to get back to work than first anticipated after Lunar New Year holidays were extended amid the outbreak.

Foxconn, the world No. 1 contract manufacturer, also said its plants in countries such as Vietnam, India, and Mexico continue to operate at full capacity with expansion plans underway as it seeks to minimise the impact of the virus.

In mainland China, manufacturers are grappling with a logistical nightmare as many of the workers they depend on cannot return to work, hindered by travel and quarantine restrictions. The restrictions, which differ by province, city and local district, have also made it difficult to transport goods.

Foxconn did not elaborate on how big the impact to revenue might be or give an estimate.

Analysts have forecast the Taiwanese company made some $11.9 billion in revenue for 2019, before the outbreak was known to have spread widely. It is due to report fourth-quarter revenue in March.

Reuters reported this month that Foxconn could see a big impact on production and the company was utilising factories in other countries to fill the gap.

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

Foxconn said the Reuters reports were not factual but did not go into detail.

KGI, a Taiwanese brokerage, estimates Foxconn's factories in China will be operating at 30 percent to 40 percent of normal production levels by the end of February and that its revenues this quarter could slump 46 percent from the fourth quarter.

Research firm Canalys estimates Apple and Huawei, which is also a Foxconn client, have 99 percent of their production in China. Analysts have also said sales in the world's biggest smartphone market could halve in the first quarter.

TrendForce has slashed its forecast for Apple's iPhone production in the current quarter by 10 percent to 41 million units and warned it may revise down again by another 5-7 percent depending on how well factories in China ramp up production.

Shares in Foxconn have lost around 9 percent so far this year.

© Thomson Reuters 2020