Apple supplier Foxconn Technology Group expects its full-year revenue to suffer from the disruption to China-based manufacturing by the coronavirus epidemic.
The warning from the world’s largest electronics contract manufacturer is the clearest indication yet of the scale of the outbreak’s impact on the global technology supply chain.
“As we are moving ahead with the reopening of mainland China manufacturing complexes in a relatively cautious manner, this will indeed have a negative impact on full-year revenues,” Hon Hai, the group’s Taipei-listed flagship company, said in a statement to the Taiwan Stock Exchange on Thursday.
Foxconn’s warning goes further than that of its largest customer, Apple, earlier this week. The California-based company said on Monday that it was likely to miss its earlier revenue forecast for the first quarter, citing the impact of the outbreak on both demand and production in China.
Analysts have said they expect the supply chain disruption to be temporary. Credit Suisse forecasts iPhone shipments in the first quarter will decrease 50 per cent compared with the final quarter of 2019. Such a drop would be 15 to 20 percentage points greater than the seasonal average, but Credit Suisse does not expect an impact on shipments of the device for the full year.
But industry insiders said it was highly uncertain how quickly production could be brought back to levels normal for the season. Local authorities in China are managing factories’ return to work with a host of requirements that are often announced or changed on short notice, and differ city to city.
Foxconn said its “cautious” resumption of work was due to the need to put employee safety first and to follow local regulations.
In its factory compound in the central Chinese city of Zhengzhou, one of the largest iPhone manufacturing bases, the company delayed the return of workers earlier this week. That is because of the requirement to house them one person per room as opposed to the usual eight per room means it no longer has enough dormitory capacity to accommodate all its staff.
Last week, a person familiar with the situation told the Financial Times it would take the company “weeks” to ramp production back up to normal levels.
Acer, the Taiwanese electronics gadget vendor, said it estimated that nearly three-quarters of workers at its contract manufacturers’ assembly operations were back at work as of Wednesday — compared with fewer than a third a week earlier. However, the company cautioned that this did not mean their production output was back up to nearly three-quarters capacity.
“This just measures the ratio of workers’ return,” said Jason Chen, chief executive. “There may be other variables. Even if the production gets back up, you may hit transport and logistics bottlenecks, or shortages, for example of packaging materials.”
Foxconn’s revenue warning came in response to a report by Taiwan’s China Times which, referring to unnamed investor sources, said the group’s revenue could plummet by as much as 45 per cent in the first quarter.
Hon Hai said its manufacturing plants outside China — including in Vietnam, Indonesia and Mexico — were running at full capacity and planned capacity expansion was continuing.
