What's going on?
Foxconn announced on Monday that Covid disruptions have put a sizable dent in its business.
What does this mean?
China’s heavy-handed approach to Covid has rocked businesses in every corner of the country, and Foxconn, the world’s biggest contract electronics manufacturer, was no exception. When Covid cases started to tick up in Zhengzhou in October, Foxconn leaped into action and put its plant under so-called “closed loop” production – that is, it insisted staff live on site. But when even that failed to put a lid on infections, workers fled, throwing the company for a loop just as Christmas production targets started looming. All in all, then, recent weeks brought Foxconn two staff walkouts and a spate of testy protests about working conditions. So it’s no surprise business has suffered: November’s revenue came in 29% lower than October’s, marking the first time the metric has dropped in November for 12 years.
Why should I care?
Zooming in: A cored Apple.
There were probably tears in Apple HQ when the firm got wind of the mess at the world’s biggest iPhone factory. See, analysts say that Foxconn’s trouble hit Apple hard, dragging the iPhone’s market share in China to 20.1%, versus 27.5% at the same time last year. That could end up throwing a wrench in the works for the all-important holiday season – so much so that some analysts think Apple will be reaching out to suppliers that usually produce lower-end models to help pick up the slack.
The bigger picture: Beyond China.
The prospect of rivals vacuuming up Apple contracts will come as a shock to the system for Foxconn, and the company will probably pull out all the stops to keep its biggest customer loyal. That could mean beefing up production capacity in countries where Covid restrictions are more relaxed, like India, Indonesia, and Vietnam – places where the firm’s operations are currently tiny compared to its business in China.