Daily Management Review

Foxconn To Cautiously Restart Its China Operations, Warns Of Revenue Hit Due To Coronavirus


While issuing a warning that revenues would be significantly impacted by the outbreak of the coronavirus in China, Apple Inc major supplier and vendor Taiwan's Foxconn said on Thursday that it has planned to "cautiously" reopen and restart production at its main factories in China.
This warning on its revenues by Foxconn was preceded just days ago by a revenue warning issued by Apple for its March quarter as the company said that there was a slower-than-anticipated resuming of opening and production of its suppliers’ factories in China as well as a weak demand for its products in the Chinese market – its second most important market after the United States. This is because of closure of its stores there and generally low demand for its products among people Chinese consumer show have been restricted in their movements to prevent the spread of the deadly coronavirus.
Mainland China has become a logistical nightmare for manufacturers because many works who have not returned back for work after the Lunar New Year holidays tat began at the end of January primarily because of a travel ban imposed by local authorities in the country as well as many cities being placed in quarantine. Transportation of goods has also become difficult because of the restrictions, which differ by province, city and local district.
The company’s factories and manufacturing units in countries outside of China such as Vietnam, India and Mexico were functioning at their full potential and the company plans to expand more of its production activities in those factories in an effort to offset the impact of the coronavirus on tits Chinese operations, said Foxconn which is the number 1 contract manufacturer of the world and whose client list also includes Huawei.
The company said that the revenues for the full year will be negatively impacted by the outbreak of the virus and the subsequent closure of its factories in China. No details were however provided by it.
There were reports published earlier in February about a "big" production impact for Foxconn as the company’s shipments to its customers, including those to Apple, possibly facing disruption because of the prolonged production halt at its Chinese factories. Reports of the company trying to cover up the production shortage in China with increased production in other countries had also emerged.
It hoped that it would be able to start half of its production in China by month-end, said a source in Foxconn, which was formally known as Hon Hai Precision Industry Co Ltd, claimed reports.  
According to the estimates of analysts, about $11.9 billion in revenue could have been made by Foxconn for 2019 before the virus outbreak caused havoc in China. The company is slated ot report its fourth-quarter revenue in March.
By the end of February, production capacity of only between 30 per cent and 40 per cent of normal production levels will be reached by Foxconn’s factories in China, estimated KGI, a Taiwanese brokerage firm. It also predicted a drop of as much as 46 per cent in its revenues for the first quarter of the current year compared to the revenues generated by it in the fourth quarter of last year.