Foxconn Cuts Revenue Outlook Following Coronavirus Outbreak

[MacRumors]

Apple's primary iPhone assembler Foxconn has slashed its 2020 revenue outlook after strict quarantines at its main base in China to guard against the coronavirus outbreak (via Bloomberg).

The company is now projecting a sales increase of 1% to 3% this year, Chairman Young Liu told Bloomberg News in a text message. That's down from a Jan. 22 forecast of 3% to 5%, before the epidemic spread around the globe, and lags the 5.4% average of analysts' projections.

Foxconn's Zhengzhou plant won't resume production until February 10 following an extended Lunar New Year break, and the company now says that workers returning from outside Henan province will be sequestered for 14 days, while staff who reside within the province will be isolated for one week.

The manufacturer previously 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.

Apple last week closed all of its corporate offices, stores, and contact centers in mainland China through February 9 due to the Wuhan coronavirus outbreak. Apple has around 10,000 direct employees in China, across its retail and corporate divisions.

Close to 60 million people remain under lockdown in China. With the virus death toll rising in recent days, the goal of people returning to work on February 10 is looking increasingly less certain. As a result, the contagion is expected to disrupt Apple's Chinese iPhone supply chain as well as dampen consumer demand and overall economic growth.

The outbreak has killed 492 people worldwide, the majority of which are in China, and infected more than 24,500 people across 25 countries.

Article Link: Foxconn Cuts Revenue Outlook Following Coronavirus Outbreak

 

[nylonsteel]

financial outlooks seem to balance on razor sharp metrics

 

[DelayedGratificationGene]

Well it’s not like Starbucks where if no coffee you lose that sale forever if people can’t get the iPhone now they will wait and get in a month from now. The sale is not lost just pushed out so it’s a non event
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financial outlooks seem to balance on razor sharp metrics

Right isn’t that ridiculous short term is just a casino. As Buffett says I don’t buy a farm because I think it’s going to rain next week I buy it for decades of production and profit.

 

[Scottsoapbox]

Well it’s not like Starbucks where if no coffee you lose that sale forever if people can’t get the iPhone now they will wait and get in a month from now. The sale is not lost just pushed out so it’s a non event

Wrong! Factories have capacities. They can make a maximum XX iPhones each day so being closed is fewer iPhones made and sold. And all of the expensive manufacturing equipment still have to be paid for (i.e.come out of their profits) even if not being used.

 

[weup togo]

We’re going to start seeing widespread shortages in the next 4-6 weeks, as channel inventory clears—in anything that has parts from China. This isn’t going to get better until summer.

 

[gridlocked]

If their operations in China completely closed they would expand operations in India and other locations at a faster pace (its in the works to do so to some degree anyway).

People who want an iPhone will just wait. Its not as if they are going to get one from someone other than Apple.

 

[Scottsoapbox]

If their operations in China completely closed they would expand operations in India and other locations at a faster pace (its in the works to do so to some degree anyway).

Factories don't magically get built overnight.

 

[Harmonious Zen]

Factories don't magically get built overnight.

They already have factories in these other locations.

 

[Freida]

Hahhahaha, hilarious. Sureeeeee

They already have factories in these other locations.

 

[code-m]

Wrong! Factories have capacities. They can make a maximum XX iPhones each day so being closed is fewer iPhones made and sold. And all of the expensive manufacturing equipment still have to be paid for (i.e.come out of their profits) even if not being used.

There was news that the Chinese government is going to inject additional stimulus due to operations impacted by 2019-nCoV. It may cover some if not most profits insofar the business is operating in black during this event.

Plus many companies have emergency funds regardless of razor thin profits. Talk about FUD.
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Factories don't magically get built overnight.

1000 bed hospital in China built in 10 days, I thinking you don’t understand how quickly things can happen in China for better or worse.
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If their operations in China completely closed they would expand operations in India and other locations at a faster pace (its in the works to do so to some degree anyway).

People who want an iPhone will just wait. Its not as if they are going to get one from someone other than Apple.

Inventory will run thin but that is about it. It will only boost manufacturing when 10th Feb comes around if not some unforeseen issue happens.
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We’re going to start seeing widespread shortages in the next 4-6 weeks, as channel inventory clears—in anything that has parts from China. This isn’t going to get better until summer.

The quarantine is expected to be lifted on 10th of Feb, not sure what type of business these companies are in considering they have been in operation for many many years. Or not like a consumable item like a bakery where whatever is baked has to be sold within an allotted amount of time before it starts going bad and last it’s best before.

Buy an iPhone today keep it two years sealed in the box the only thing it will require is a charge when you open it up, it’s a time capsule.

 

[jav6454]

Putting aside the fact that the virus originated in China, this outbreak highlights the main issue of not having a diverse supply chain in manufacturing/final assembly sites of FGs. Right now, Apple makes up to 96% of its FG devices in China (Shenzhen area).

Apple hasn't diversified it's final assembly and has constantly cited skilled labor as an excuse. Apple needs to look beyond China and look into other markets like Vietnam, India or even here in the Americas (Latin America). Skilled labor is found, they just have been too comfortable with their status quo to do squat. I'm quite positive several of these sites could offer Apple good incentives (taxes, wage, etc) and would work with Apple to provided what they need to secure a slice of the final assembly pie.

Yes factories don't start overnight in several areas, but using that excuse is recipe of disaster.

 

[nexusrule]

All tech companies are doomed.

 

[Cosmosent]

The most-important decisions in Cook's lifetime are happening right now !

 

[kemal]

It will increase demand for constrained products. And maybe China will stop keeping poultry and pork in the same pen.

 

[Bin Cook]

Virus outbreaks are great opportunity to un-hide any skeletons on your balance sheet.

 

[macnchiefs]

I work for a company that used to manufacture in China but now we are spread out into Malaysia and Taiwan.(Trump's tariffs did have an impact)

But the issue that everyone has to keep in mind is that even if you aren't assembling your products in China all of the components or a majority of them are still coming from China. Which is why Foxconn's ability to keep up production at their other facilities will still be hampered.

 

[Expos of 1969]

If their operations in China completely closed they would expand operations in India and other locations at a faster pace (its in the works to do so to some degree anyway).

People who want an iPhone will just wait. Its not as if they are going to get one from someone other than Apple.

And some may pause, do some research, talk to others and decide to move away from Apple.

 

[JPack]

But the issue that everyone has to keep in mind is that even if you aren't assembling your products in China all of the components or a majority of them are still coming from China. Which is why Foxconn's ability to keep up production at their other facilities will still be hampered.

This.

Most people don't seem to get that China not only has skilled labor, it's also where R&D and production of the components happens. The iPhones assembled in India for example, are based on knock-down kits from China.

 

[weup togo]

The quarantine is expected to be lifted on 10th of Feb,

Nope. China just isn't going to preannounce that they're locking down for three months. I would bet you $1000 right now on this. Anybody who "expects" the quarantine to end next week is not paying any attention.

 

[macnchiefs]

Also - this corona virus scare will give any company in the world that buys anything from China an "out" for this quarters revenue. If you miss on your guidance to investors you just say, "coronavirus made me do it." Lot's of CEOs won't get fired because of it.

 

[I7guy]

And some may pause, do some research, talk to others and decide to move away from Apple.

And likely there are other, new customers that Apple may get. There is always churn.

 

[Tech198]

At least the physical human can't be infected with a digital virus

 

[code-m]

Nope. China just isn't going to preannounce that they're locking down for three months. I would bet you $1000 right now on this. Anybody who "expects" the quarantine to end next week is not paying any attention.

It depends as China prematurely making such announcement will have a large effect on many markets. That being said 2019-nCoV could mutate but we don’t know for sure. Infection period for viruses usually are around 10-14 days and require a host.

At present there are some unknowns that make scientists uneasy and that is conveyed through government action or even overreaction. Safe than sorry.

 

[gridlocked]

Factories don't magically get built overnight.

Those factories outside of China already exist.