'No Big Hit To IPhone Production From Shenzhen Curbs'

Production of Apple iPhones will not take a big hit from Foxconn's suspension of operations in Shenzhen, as the city faces fresh curbs to contain a Covid-19 outbreak, JP Morgan analysts believe.

Apple's key supplier, Hon Hai Precision Industry, better known as Foxconn, said it had suspended operations in Shenzhen until further notice and would deploy backup plants to reduce disruption.

"We believe the impact from the Shenzhen lockdown on iPhone electronics manufacturing services build should be limited – about 10 percent maximum of global iPhone production – due to low season and small production exposure to Shenzhen," analyst Gokul Hariharan wrote in a note.

JP Morgan also said the Shenzhen region represents less than 20 percent of total iPhone production capacity for Foxconn, with the vast majority of assembly plants being located in Zhengzhou, an industrial and transport hub.

Many factories in China, including plants run by carmakers Toyota and Volkswagen, were suspended due to the restrictions.

JP Morgan does not anticipate an industry-wide restocking for components due to these production suspensions, but warns that lockdowns in the Shanghai region could be more disruptive.

The lockdown in Shenzhen will not have a big impact on semiconductor production, the brokerage said, while adding that global LCD panel supply could be hurt. (Reuters)