Apple Inc’s major suppliers in China, including iPhone maker Hon Hai Precision Industry Co (鴻海精密), plan to resume full-scale production on Monday next week, despite the 2019 novel coronavirus that has infected thousands and limited travel.
Hon Hai, the most important manufacturer for the US company, yesterday said that it expects to be able to restart facilities throughout China on schedule, a text message sent to Bloomberg News said.
Suppliers such as Quanta Computer Inc (廣達電腦), Inventec Corp (英業達) and LG Display Co also said they would get back to work in China next week.
Photo: AP
While Chinese officials and companies have targeted Monday next week as the date to resume work in much of the nation, doubts about the timing have grown as the death toll rises, workers find themselves stuck in municipal lockdowns, and the transport of people and goods has been hampered.
Virtually all of the world’s iPhones are made in China, primarily by Hon Hai at its so-called iPhone City in Zhengzhou, and by Pegatron Corp (和碩) at an assembly site near Shanghai.
The sites are more than 500km from Wuhan, Hubei Province, the epicenter of the outbreak.
Hon Hai has asked its employees in Hubei Province not to return to their factories and to report their health condition to managers on a daily basis, an internal memo reviewed by Reuters showed.
The company also said employees who follow the rules would be paid as usual and those who failed to do so would be “severely” punished, although it did not elaborate.
A hotline was set up to encourage employees to report those who had broken the rules, with an award of 200 yuan (US$29), the memo dated Saturday said.
Morningstar Inc analyst Don Yew sees “limited” impact on Hon Hai’s supply chain, saying its four subsidiaries in Hubei Province only accounted for 1.8 percent of overall revenue in 2018 and vendors such as Apple maintain a diversified supply chain.
However, a spread of the outbreak to major smartphone manufacturing hubs such as Guangdong Province could lead to Morningstar revising its financial estimates for companies such as Hon Hai, Yew said.
“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,” GF Securities (Hong Kong) Brokerage Ltd (廣發證券香港) analyst Jeff Pu (蒲得宇) said.
Any potential labor shortage is a serious issue that weighs on the minds of suppliers, he said.
Apple earlier this week said that it would close its corporate offices, stores and contact centers in China until Sunday, out of an “abundance of caution and based on the latest advice from leading health experts.”
Last week, Apple reported revenue that beat Wall Street expectations on rebounding iPhone demand, sending its shares to a record high.
It issued a forecast that was wider than usual due to uncertainty created by the spread of the coronavirus.
A spokesman referred questions to Apple chief executive officer Tim Cook’s remarks last week that the company is monitoring developments in China closely, and working with employees and partners in the region.
Apple has about 10,000 direct employees in China, across its retail and corporate entities.
Its supply chain has more than 1 million workers manufacturing products such as the iPad, iPhone and Apple Watch.
Additional reporting by Reuters
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