Supply chain shortages cause Apple production to cut Foxconn's "rush to work" in the first quarter said that there were only two days of spring festival holidays

On January 24, Foxconn's parent company Hon Hai Precision issued an announcement that its subsidiary Hongbai Technology Hongbai Taoyuan Free Trade Park will temporarily stop operating in cooperation with epidemic prevention. Hon Hai said that the company will assist relevant units to check the footprints of infected employees to ensure the safety of employees, and the factory environment will immediately arrange for elimination operations. "Taoyuan and Hsinchu factories prohibit employees from moving across factories." Hon Hai precision said.

As Apple's largest production base in the world, the impact of the global epidemic on Foxconn also affects the supply chain nerves. However, Hon Hai said that the above-mentioned confirmed incident of Hongbai employees had no significant impact on hon hai's operations. "Hongbai is mainly a product in the server field, and the factory is small, so it has no big impact on the company's overall operation." Foxconn insiders told the first financial reporter.

Earlier, in response to the impact of the epidemic in Henan on Foxconn, a Foxconn spokesperson told reporters that it did not affect (Apple's) production capacity.

It is currently the peak production season for Apple's iPhone flagship new product.

According to the latest data from research firm Canalys, Apple's smartphone shipments in the fourth quarter of 2021 accounted for 22% of the global total due to strong consumer demand for the iPhone 13. Samsung ranked second, slipping from the top spot in the third quarter of 2021 with a market share of 20%. Xiaomi is still in third place with a market share of 12%. OPPO and vivo both entered the top five, with market shares of 9% and 8%, respectively.

Downstream sales are also driving Foxconn's overall operating performance. On December 16 last year, Hon Hai Precision announced its November results, and the company's revenue for that month was NT$621.713 billion, an increase of 12.86% month-on-month but a decrease of 8.76% year-on-year. However, thanks to strong demand for the iPhone 13 series, Hon Hai Precision's net profit in the third quarter was NT$37 billion (about US$1.3 billion), higher than the average analyst estimate of NT$32.4 billion, and sales of NT$1.4 trillion, a record high.

"Driven by the iPhone 13's outstanding performance, Apple is back at number one in the smartphone market after three quarters. Apple's iPhone has never performed in Chinese mainland, and the aggressive pricing of its flagship product keeps its value proposition strong. Apple's supply chain is beginning to recover, but due to shortages of key components, it still had to cut production in the fourth quarter, so it cannot produce enough iPhones to meet market demand. On January 22, Canalys analyst Sanyam Chaurasia said in a note that Apple's total shipments in the fourth quarter increased by only 1%, and suppliers are facing supply chain issues and the impact of the recurrence of the new crown epidemic.

Nicole Peng, vice president of mobile business at Canalys, said that supply chain issues have the greatest impact on low-end vendors. Component makers are doing their best to increase production, but it will take years for major foundries to significantly increase chip capacity. Smartphone brands are changing their thinking to make the most of their own conditions, adjusting device specifications to existing materials, engaging emerging chipmakers to secure new sources of integrated circuit supply, focusing product lines on the best-selling models, and staggering the release of new products. "These practices can give big brands an advantage, and these benefits can persist in the short term, as supply bottlenecks won't be alleviated until the second half of 2022."

Liu Yangwei, chairman of Hon Hai Precision, said at an internal event of Hon Hai Precision on the 23rd that because the seasonal performance of the first quarter may be better than in the past few years, there may only be a two-day Spring Festival holiday in several important factories.

It is reported that in order to meet the production needs of the iPhone 13 Pro, Foxconn's Henan Zhengzhou factory recently recruited urgent workers and set up a "rebate bonus" as an additional reward.

Foxconn did not confirm the above recruitment information. However, the reporter from Foxconn's multiple recruitment software release information, is still increasing efforts to recruit.

Industry insiders believe that Apple has nearly 10,000 direct employees in China and millions of workers in its supply chain. Due to the impact of the new coronavirus epidemic, the vast majority of assembly line workers have been restricted from traveling, and if the epidemic is not controlled in time, the supply chain disruption dilemma will occur. "Mobile phone factories will reserve 2 to 8 weeks of spare parts and other equipment inventory, enough to assume a buffer role in the short term of the outbreak." But it is inevitable that if the epidemic continues to run rampant in this era of light inventory, the impact of supply chain disruptions will surely come quickly. ”