iPhone Assembler Foxconn Posts Near 90% Drop in First Quarter Profit

Apple’s main iPhone assembler Foxconn posted an almost 90 percent drop in first-quarter profit on Friday, as the impact of the global health crisis hit production demand from clients (via Reuters).


But the Taiwanese electronics manufacturer said the worst was over, and the company would “stabilize in the second quarter,” adding that it expects revenue to show double-digit growth in comparison to the first quarter.

Foxconn reported net profit of T$2.1 billion ($70.25 million) for the January-March quarter, falling well short of a Refinitiv consensus estimate of T$8.88 billion drawn from 14 analysts.

Foxconn slashed its 2020 revenue outlook in March after strict quarantines were enforced at its China plants for a period in February, at the height of the crisis, which has now largely resolved in the country.

Apple sold fewer than 500,000 iPhones amid the ongoing curbs on travel and transport – a 60 percent slump in ‌‌iPhone‌‌ sales compared to the February 2019 quarter. The same month, Apple announced that its financial guidance for the March quarter would fall short. Foxconn went on to suffer its biggest monthly drop in revenue in about seven years because of the containment measures.

The manufacturer had earlier claimed the viral outbreak had had a “fairly small impact” on ‌‌‌iPhone‌‌‌ production, suggesting its factories in other countries like Vietnam, India, and Mexico had been able to fill the gap.

It and other factories in China have reportedly implemented stringent measures to prevent the another viral outbreak in the country, while the Chinese government is mandating that employers check temperatures and provide face masks to employees, as well as submitting daily reports on workers’ health statuses.

Foxconn has since resumed normal operations at all of its main factories in China.

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Apple Urges Chinese AirPods Supplier to Expand and Challenge Foxconn for iPhone Assembly

Apple has reportedly advised its Chinese AirPods assembler Luxshare to make a major investment in Catcher Technology, a Taiwanese firm that makes the metal casing for iPhone and MacBooks.

According to sources who spoke to Nikkei Asian Review, Apple hopes the move will create a “formidable” alternative to its longtime supplier, Taiwan’s Foxconn.

Luxshare-ICT, a fast-rising Chinese tech company known for its aggressive growth strategy, has been in talks with Catcher Technology, the world’s second-largest metal casing provider, for more than a year and has recently entered a deeper round of negotiations, said one of the people who is familiar with the situation.

The deal, if realized, would give Luxshare the ability to produce high-quality metal casing as well as access to smartphone assembly know-how, which would take it a step closer to becoming the Chinese version of Foxconn — a single company with operations that span nearly the entire electronics supply chain. Such a move could ultimately help Luxshare grab a share of ‌iPhone‌ production, which ships around 200 million units each year.

Apple is said to be keen to reduce its reliance on Foxconn, which has accounted for more than 50 percent of ‌iPhone‌ production since Apple launched the device in 2007. Diversifying the Cupertino giant’s assembly supply chain would also make it less vulnerable to local economic instabilities and allow it to negotiate better prices with manufacturers.

Apple is continually seeking to broaden its supply options around the globe, and has even gone so far as to invest its own money in companies to keep them afloat. One recent example is its multi-million bailout provision for LCD panel maker Japan Display, which Apple wants to see become a future OLED panel supplier and thereby reduce its reliance on Samsung.

Whether Catcher goes through with any deal remains to be seen. While such a situation would be a win-win for Apple, the benefits to suppliers are less clear-cut as they are likely to shoulder more of the risk of such an investment if consumer demand sours amid the global economic downturn linked to the ongoing health crisis.

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Apple Supplier Factories Reducing Staff and Cutting Overtime Due to Falling Demand

With most Apple Stores around the world closed since March 14, demand for Apple’s devices has been dropping off. As a result, the factories that assemble those devices are reducing staff and cutting overtime hours, according to Financial Times.


Multiple workers at Foxconn’s Zhengzhou complex, where iPhones are assembled, said that Foxconn has paused hiring and has begun cutting some of the temporary workers that it hired after ramping up production following factory closures in February.

Overtime hours have also been cut, and Foxconn has been encouraging employees to take holidays. Workers say no overtime has been worked since April 10.

Pegatron has also been cutting employees due to falling demand. Approximately a thousand temporary and third-party workers were fired, according to an employee at the factory. “The US orders are not coming, so why would we keep all the workers,” he said.

Apple has begun reopening its stores, starting with a retail location in South Korea. There is no clear word yet on when stores in the United States are set to open, but Apple is aiming for May. Stores are expected to reopen on a rolling basis, with Apple taking into account local conditions and guidelines for each location.

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Foxconn and Other Chinese Factories Implement Strict Measures to Prevent Another Outbreak

Foxconn and other factories in China have implemented stringent measures to prevent the another viral outbreak in the country, according to an overview of the practices shared today by The Washington Post.

Pages from a manual issued by Foxconn that covers rules employees must follow. Image from The Washington Post.

Apple iPhone supplier Foxconn, for example, has organized workers into teams of 20 who stick together day and night for health tracking purposes. “The same group of employees work, travel, live, and eat together to ensure that employees’ personal trajectories are fully traced,” reads a notice from the Zhengzhou government where Foxconn is located.

A Foxconn employee told The Washington Post that workers are provided with a face mask and have their temperatures checked regularly, plus there are infrared cameras to check people for fevers as they walk by. Foxconn said that it is also using nucleic acid tests and chest x-rays when required, and it has produced 10 million surgical masks for employees.

At lunchtime, Foxconn workers eat at cafeteria tables separated from one another by tall dividers. Cafeteria seats even have QR codes that workers can scan so Foxconn has a record of who sat where and when for meals. In the dormitories where they sleep, employees leave their coats and bags in a designated spot for disinfection.

Foxconn and other Apple factories were shut down for much of February due to the outbreak, which has now largely resolved in China. China is mandating that employers check temperatures and provide face masks with to employees, as well as submitting daily reports on workers’ health statuses. Many businesses in the United States may need to take similar steps when stay at home orders around the country begin lifting.

Other companies in China have implemented similar measures, including preventing employees from leaving factories and going home in some cases, with additional details available in The Washington Post‘s full report.

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Foxconn Suggests There is Still Opportunity for 5G iPhones to Launch on Time

In a private conference call with investors this week, Apple supplier Foxconn suggested that there is still a possibility that 5G-enabled iPhones will launch on time this year despite pandemic-related supply chain disruptions, according to Bloomberg.


Of course, Foxconn did not mention Apple or the iPhone specifically:

“We and the customer’s engineers are trying to catch up the missing gap, after we lost some days due to travel ban. There’s opportunity and possibility that we might catch up,” Yang said. “But if there’s a further delay in the next few weeks, months, then you probably have to reconsider launching time. It’s still possible.”

The report claims that trial assembly of new iPhones typically begins in early June ahead of mass production of the devices in August, so there are still several months for Apple to catch up should pandemic restrictions begin to be eased.

With hundreds of suppliers of iPhone components, however, Apple will have to rely on more than Foxconn to ensure an on-time launch.

Prior to the pandemic, it was rumored that Apple planned to introduce four high-end iPhone 12 models with notched OLED displays and 5G support in the fall, including a 5.4-inch model, two 6.1-inch models, and a 6.7-inch model. Following in the footsteps of the new iPad Pro, some or all of the models are expected to gain a LiDAR scanner for augmented reality.

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