Foxconn Faces 29% Sales Drop in November Due to Lockdown at Zhengzhou Factory in China

Workers at the Foxconn factory in Zhengzhou, Henan Province, China, are leaving the factory carrying their belongings.
[Image source=AP Yonhap News]

[Asia Economy Reporter Lee Ji-eun] Foxconn, the world's largest electronics manufacturer and Apple's biggest iPhone producer, has seen a sharp decline in sales due to the lockdown of its factory in Zhengzhou, China. This is the first time in 12 years that Foxconn's sales have decreased ahead of the Christmas season.

According to major foreign media on the 5th (local time), Foxconn's sales last month were 551 billion New Taiwan dollars (approximately 23.51 trillion KRW), down 29% from the previous month and 11.4% compared to the same month last year.

Foxconn attributed the sales decline to reduced production of home appliances, including smartphones. Historically, Foxconn produced about 40% of its total shipments in the fourth quarter each year, which includes Christmas, but production disruptions this month have led to a sharp drop in sales.

In a statement released that day, Foxconn said, "Some shipments were affected due to the epidemic outbreak in Zhengzhou, China," adding, "We are reallocating production across factories and have started hiring new employees to restore production capacity to normal levels."

However, an anonymous source told major foreign media, "After violent protests occurred inside the factory last month, workers are fearful of working there," expressing uncertainty about whether hiring will proceed smoothly.

Foxconn has faced operational disruptions since Chinese authorities locked down the factory, which employs 200,000 workers, from mid-October to prevent the spread of COVID-19. This factory produces 60% of the iPhones made by Foxconn. Following the authorities' quarantine measures, violent protests by factory workers against management and officials broke out, and about 20,000 employees resigned en masse. Major foreign media estimate that Foxconn's electronics production at the Zhengzhou factory has decreased by 30% since the start of this month due to these disruptions.

Apple has also suffered significant sales damage due to the lockdown of the Zhengzhou factory. Investment bank Jefferies reported that after the Foxconn factory lockdown, Apple's iPhone market share last week was 20.1%, down 7.4 percentage points from 27.5% in the same period last year. iPhone sales in China last week decreased by 46% year-on-year and 35% compared to the previous week.

Jefferies analyzed, "Apple's iPhone sales have been declining for three consecutive weeks," adding, "This appears to be due to limited iPhone supply caused by production disruptions at Foxconn's Zhengzhou factory."