Hon Hai Cautiously cuts back their sales forecast for 2020 as the Coronavirus has created a Volatile Business Environment
On January 29, Patently Apple posted a report titled "Apple's CEO Calmly and a Matter-of-Factly touched on the Coronavirus impact yesterday putting the issue into Perspective." The report noted that "Apple's main iPhone assembler Foxconn Technology Group confirmed all of its facilities will resume full-scale production starting Feb. 10." That's still the plan with one new addition being added early this morning.
According to one of two stories on Hon Hai today, Bloomberg reports: "Hon Hai said in a statement Wednesday that workers returning from outside Henan province, site of its main factory in Zhengzhou, will be sequestered for 14 days. Any staff reporting to work who reside within the province itself will be isolated for 7 days, the company added." The first story is on Bloomberg's technology homepage today.
Considering that we don't know if there's 5 or 200 workers from outside the Henan province, it's difficult to understand the gravity of Hon Hai's announcement in respect to Apple's iPhone production.
In Bloomberg's second report, they created a chart as seen below that reflects Hon Hai's decision to cut its 2020 revenue growth after assessing the potential impact of the coronavirus outbreak.
Hon Hai Chairman Young Liu emailed Bloomberg to clarify that sales were originally set on January 22 for 3% to 5% sales increase for 2020 and have now been cautiously scaled back to 1% to 3% for the year.
However, keep in mind that Hon Hai makes computers for HP, Sony and others at this plant, so the sales cut doesn't translate to being an Apple problem exclusively.
The report also noted that Smartphone sales -- particularly in China -- are expected to take a big hit from the coronavirus outbreak after government-imposed containment measures snarled logistics and emptied out stores. Hon Hai’s Hong Kong-listed unit FIH Mobile Ltd. makes phones for Xiaomi Corp. and Huawei Technologies Co.
You could read more of this second Bloomberg report titled "iPhone Maker Hon Hai Cuts 2020 Outlook After Virus Outbreak," that is on Bloomberg's technology homepage today.
Both Bloomberg reports appear to want to push the panic button regarding iPhone production and yet it's still too early to be doing that. Apple will definitely provide Wall Street and shareholders with an update or warning should the situation warrant it.
At present, Apple's CEO has pointed to having alternative sources of production if necessary. So it would be best to follow the developing situation regarding the coronavirus without trying to drum up unnecessary fear about production at the main Hon Hai plant hurting iPhone sales.
Update 7:20 am PST:
A new Chinese report posted today provides us with new information beyond that from Bloomberg. The report notes that "The epidemic of pneumonia in Wuhan has spread. Zhengzhou City, Henan Province, mainland China announced yesterday that it will implement "closed management" (semi-closed city) within the territory, and strictly control the entry and exit of local personnel and transportation. They're the third city to be semi-closed.
The Chinese report noted that "The legal person pointed out that Zhengzhou is not only the base of iPhone production, but also a major non-Apple manufacturing town. For every seven mobile phones in the world, one is assembled in Zhengzhou. Zhengzhou's "semi-closed city" not only blew up the shares of Ping An, but also non-Apple supply chains such as MediaTek.
In the face of external concerns, Hon Hai Group issued a three-point statement yesterday, stressing that the target of resumption of work in the main factories of the Group's mainland on February 10 will remain unchanged.
Second, the current official epidemic control in mainland China will help the group to resume work. After the pneumonia outbreak in Wuhan, Daliguang pointed out that the outlook for January remains unchanged, and the customer needs to resume work in February before the follow-up evaluation.
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