Coronavirus continues to take its toll on business operations in China. Contract manufacturing giant Foxconn informed its employees today that its headquarters, and an iPhone plant in Shenzhen, will not reopen on February 10th as planned. The moves are in accordance with guidance from central and provincial governments intended to limit human-to-human spread of the virus.
“To safeguard everyone’s health and safety and comply with government virus prevention measures, we urge you not to return to Shenzhen,” Foxconn told employees in a text message viewed by Bloomberg. “We’ll update you on the situation in the city. The company will protect everyone’s work-related rights and interests in the duration. As for the happy reunion date in Shenzhen, please wait for further notice.”
Shipment estimates were already gloomy — The new delay will surely add to worries that arose following Foxconn’s announcement of closures earlier this week. Apple hedged on its revenue estimates for the current quarter as a consequence of manufacturing delays, with analyst Ming Chi-Kuo predicting that iPhone shipments may fall 10 percent this quarter as a result of the closures — and that was before this new delay. Foxconn’s other iPhone facility in Zhengzhou will likely also remain closed for now (it hasn’t been confirmed either way). Apple’s retail stores in the country are closed, further impacting sales.
Not all is bad, however, as Apple has facilities in India producing some lower-end variants on the iPhone, and Foxconn has plants in Vietnam, India, and Mexico where it can shift some of its workload. Once the shuttered factories are reopened, Foxconn has said it would work overtime to make up for the disruption.
Don't worry about Apple — The more important thing to consider is the lives that have been lost to the deadly virus. More than 630 human lives have been lost, mostly the elderly or infirm, and more than 31,400 people worldwide have been infected. Chinese citizens have been raging online after Li Wenliang, the doctor who first tried to call attention to the virus, himself died from coronavirus.
Apple, meanwhile, is a trillion-dollar money printing machine with a cash hoard in the hundreds of billions. One or two quarters where it takes a hit due to unforeseeable circumstances does not matter to the company at all in the long term.
Foxconn should not rush to reopen anything until China is able to take control of the outbreak. Apple’s stock fell 5 percent in response to its outlook for the quarter, and while I understand stock prices are based in part on expectations for future revenue, no company should be looking at its stock price to decide whether or not to put workers at risk. iPhones can wait.